overlapping generations model in which the equilibrium contract form is optimal, given the contracts elsewhere in the economy … contingent contract, while reducing purchasing power risk, also increases the cash flow risk. Under a binding cash in advance … constraint on the repayment of contracts, this second risk is costly, and it is minimized by a nominal contract. Finally, the …

units of fiat money, prove to be the optimal contract form in the presence of either relative or aggregate price risk. When …-in-advance constraint. In this case, a contingent contract increases the risk of holding excessive cash balances …

overlapping generations model in which the equilibrium contract form is optimal, given the contracts elsewhere in the economy … contingent contract, while reducing purchasing power risk, also increases the cash flow risk. Under a binding cash in advance … constraint on the repayment of contracts, this second risk is costly, and it is minimized by a nominal contract. Finally, the …