Abstract:Money allows agents to achieve allocations that are not possible without it. However, currency in most economies is a uniform object, and there may be incentive compatible allocations that cannot be implemented with a uniform currency. We show that currency reform, ie, changing the monetary base by replacing one currency with another, is a powerful tool that can enable a monetary authority to achieve a desired allocation. Our monetary mechanism with currency reform is anonymous and features a nonlinear exchang… Show more
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