This paper investigates the role of fiat money in decentralized markets, where producers have private information about … the quality of the goods they supply. Money is divisible, terms of trade are determined endogenously, and agents can … finance their consumption with money or with real production. When the fraction of high quality producers in the economy is …

The aim of this paper is to study asset reallocation in financial markets subject to search, bargaining, and … consequence, a positive liquidity differential between money and real assets emerges, resulting in an increased demand for fiat … money, as observed since the eruption of the global financial crisis. A policy intervention replacing information sensitive …