Citation

Discussion Paper Details

Please find the details for DP9700 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Money as a Unit of Account

Author(s): Matthias Doepke and Martin Schneider

Publication Date: October 2013

Keyword(s): balance-sheet risk, credit chains, optimal currency areas and unit of account

Programme Area(s): International Macroeconomics

Abstract: We develop a theory that rationalizes the use of a dominant unit of account in an economy. Agents enter into non-contingent contracts with a variety of business partners. Trade unfolds sequentially in credit chains and is subject to random matching. By using a dominant unit of account, agents can lower their exposure to relative price risk, avoid costly default, and create more total surplus. We discuss conditions under which it is optimal to adopt circulating government paper as the dominant unit of account, and the optimal choice of "currency areas" when there is variation in the intensity of trade within and across regions.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9700

Bibliographic Reference

Doepke, M and Schneider, M. 2013. 'Money as a Unit of Account'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9700