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Separation of Unit of Account from Medium of Exchange
- Authors
- Kim, Young Sik; Lee, Manjong
- Issue Date
- 12월-2013
- Publisher
- WILEY
- Keywords
- E31; E42; F33; debasement; medium of exchange; unit of account; nominal price rigidity
- Citation
- JOURNAL OF MONEY CREDIT AND BANKING, v.45, no.8, pp.1685 - 1703
- Indexed
- SSCI
SCOPUS
- Journal Title
- JOURNAL OF MONEY CREDIT AND BANKING
- Volume
- 45
- Number
- 8
- Start Page
- 1685
- End Page
- 1703
- ISSN
- 0022-2879
- Abstract
- The separation of a unit of account (UoA) from a medium of exchange (MoE) in the commodity-money system is investigated by considering explicitly a seller's choice of UoA in terms of either an MoE or a unit of metal weight. If the likelihood of debasement of an MoE and its rate are high enough, the price is posted in terms of a unit of metal weight rather than an MoE. Interestingly, this MoE-UoA separated equilibrium yields the flexible nominal price, whereas an MoE-UoA integrated equilibrium yields the sticky one. This implies the nominal price rigidity in the fiat-money system where MoE and UoA are integrated.
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