Money that (a) derives its value entirely from the mandate of the government, and (b) cannot be freely traded. Fiat money is not the same thing as floating currency
, because if a floating currency is intrinsically worthless then its lack of worth will be reflected in the forex markets. Fiat money, on the other hand, does not require a disciplined monetary of fiscal policy on the part of the issuing authorities; exchange rates are fixed by decree, which means the state also controls supplies of hard (foreign) currency.
Examples of fiat money include the French revolutionary assignat and the Soviet-era ruble.