Economic Theory

, Volume 2, Issue 4, pp 447–464 | Cite as

Fiat money in the Kiyotaki-Wright model

  • S. Rao Aiyagari
  • Neil Wallace
Research Articles


We study versions of the Kiyotaki-Wright (1989) model with fiat money and show that: (1) The use of a low storage cost fiat money may be necessary for specialization and trade, (2) there can be valued fiat money steady states which are indeterminate, (3) there are no nontrivial steady-states in which all trades consist of fiat money for goods, (4) fiat money may be valued even if it is not the least costly-to-store object, and lastly, (5) two fiat monies with different storage costs may both be valued.


Steady State Economic Theory Storage Cost Fiat Money 
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Copyright information

© Springer-Verlag 1992

Authors and Affiliations

  • S. Rao Aiyagari
    • 1
  • Neil Wallace
    • 1
  1. 1.Federal Reserve Bank of MinneapolisMinneapolisUSA

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