Turnpike model of money

The turnpike model of money explains valued money as a way to facilitate trade between agents who meet as strangers in spatially separated isolated markets with no communication or transactions between the markets at any time.

The turnpike model of money resolves well-known problem that in standard frictionless Arrow-Debreu general equilibrium model money can't facilitate exchange and nonmonetary competitive equlibria are Pareto optimal.

References

• Sargent, Thomas J. and Lars Ljungqvist (2004). Recursive Macroeconomic Theory. Cambridge, Massachusetts: The MIT Press. ISBN 0-262-12274-X.
• Townsend R. Models of Money with Spatially Separated Agents, in Models of Monetary Economies, John Kareken and Neil Wallace, eds., Federal Reserve Bank of Minneapolis, 1980, 265-303.