Economics Seminar - "Fiat Money with a Finite Horizon: Theory and Experimental Evidence"

This paper integrates monetary theory and experimental economics to study conditions under which fiat money is welfare improving. We implement a finite-horizon monetary exchange economy where fiat money can be valued, challenging the prevailing view that it lacks value in finite settings. Experimental results show that fiat money alone has little impact on production, but when combined with strategy recommendations, production rates approach 100%. Importantly, fiat money is essential for sustaining trade, as production rates remain very low without it, even when recommendations are provided. Our findings provide insights into the implementation of monetary economies in the laboratory.