Asymmetric information and demand for money in an overlapping generations economy

This paper studies a pure exchange overlapping generations economy in which agents have asymmetric information pertaining to their income realizations . Such an information asymmetry introduces a role for fiat money that would otherwise be absent. This information asymmetry can also drastically alter the equilibrium properties of the analogous model with perfect information . In general, the more severe the information asymmetry, the greater the de mand for fiat money.