In an overlapping generations model with borrowing and lending, uncertainty, and asymmetric information, fiat money may be essential to the existence of a competitive equilibrium. It may also serve to enhance the information of economic agents in a well-defined sense. In addition, the model presented provides suggestions about why the presence of valued fiat currency is essential to existence of equilibrium, even though in equilibrium perfect substitutes for money may exist.
Published in: _The Canadian Journal of Economics_ (Vol. 19, No. 4, November 1986, pp. 780-797), https://doi.org/10.2307/135326.