In this paper we study the endogenous choice to accept fiat objects as media of exchange, the fundamentals that drive their acceptance, and their implications for their bilateral nominal exchange rate. To this end, we consider a small open economy where agents have no restrictions on what...

In this paper we develop a two-country global monetary economy where a monetary equilibrium exists because of fundamentaldecentralized trade frictions ? a Lagos-Wright search and matching friction. In the decentralized markets (DM), the terms of trade can be determined either by bargaining or by...