A Model of Private Bank-Note Issue

Cavalcanti, Ricardo de Oliveira; Wallace, Neil

doi:10.1006/redy.1998.0044

Cited by 146 publications

(120 citation statements)

References 13 publications

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“…We model the fact that banknotes had to be redeemed in specie on demand by adapting the Cavalcanti-Wallace (1999) innovation that banks are required to produce when a banknote is presented for redemption and their past actions are public information. This implies that a nonbanker will be willing to accept a banknote when trading with a banker.…”

Section: Resultsmentioning

confidence: 99%

“…Because the probability of nonbanker-banker meetings is low in this case, focusing on this case is equivalent to making Cavalcanti and Wallace's (1999) assumption that the measure of bankers in the economy is small. Because we are unable to obtain analytic comparative statics results, we continue with the numerical analysis.…”

Section: K) (Recall That In a Monetary Equilibrium Consumers Always mentioning

confidence: 99%

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A model of banknote discounts

Ales

Carapella

Maziero

et al. 2008

Journal of Economic Theory

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Prior to 1863, state-chartered banks in the United States issued notes-dollar-denominated promises to pay specie to the bearer on demand. Although these notes circulated at par locally, they usually were quoted at a discount outside the local area. These discounts varied by both the location of the bank and the location where the discount was being quoted. Further, these discounts were asymmetric across locations, meaning that the discounts quoted in location A on the notes of banks in location B generally differed from the discounts quoted in location B on the notes of banks in location A. Also, discounts generally increased when banks suspended payments on their notes. In this paper we construct a random matching model to qualitatively match these facts about banknote discounts. To attempt to account for locational differences, the model has agents that come from two distinct locations. Each location also has bankers that can issue notes. Banknotes are accepted in exchange because banks are required to produce when a banknote is presented for redemption and their past actions are public information. Overall, the model delivers predictions consistent with the behavior of discounts. ABSTRACT Prior to 1863, state-chartered banks in the United States issued notes-dollar-denominated promises to pay specie to the bearer on demand. Although these notes circulated at par locally, they usually were quoted at a discount outside the local area. These discounts varied by both the location of the bank and the location where the discount was being quoted. Further, these discounts were asymmetric across locations, meaning that the discounts quoted in location A on the notes of banks in location B generally differed from the discounts quoted in location B on the notes of banks in location A. Also, discounts generally increased when banks suspended payments on their notes. In this paper we construct a random matching model to qualitatively match these facts about banknote discounts. To attempt to account for locational differences, the model has agents that come from two distinct locations. Each location also has bankers that can issue notes. Banknotes are accepted in exchange because banks are required to produce when a banknote is presented for redemption and their past actions are public information. Overall, the model delivers predictions consistent with the behavior of discounts.

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Section: Resultsmentioning

confidence: 99%

Section: K) (Recall That In a Monetary Equilibrium Consumers Always mentioning

confidence: 99%

A model of banknote discounts

Ales

Carapella

Maziero

et al. 2008

Journal of Economic Theory

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“…Let S t ≡ {s 0 } × {l, h} t denote the set of possible histories up to date t 2 Berentsen, Molico and Wright [1] are the first to introduce lotteries into matching models of money. 3 This over-production in turn leads to history-dependence. See Proposition 10 of their paper for details.…”

Section: The Planner's Problem and The Solutionmentioning

confidence: 99%

“…Absent lotteries, CE achieve that by promising the current seller more output than the first-best in the future when he is a buyer and the shock is such that the first-best level of output is low. 3 With lotteries, the current acquisition of money can be made more valuable by having the buyer surrender money with some probability in that future situation.…”

Section: Introductionmentioning

confidence: 99%

A comment on: “Efficient propagation of shocks and the optimal return on money”

Huang¹,

Igarashi²

2012

Journal of Economic Theory

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“…We assume that agents who have access to the CDB receive a number-an infinite sequence of 0 and 1-that uniquely identify them. 4 In a single coincidence meeting between two agents who have access to the CDB, the buyer agrees to reveal her identifying number to the seller. The seller sends a verifiable message to the CDB providing the identity of her trading partner and stating the amount of goods sold.…”

Section: The Modelmentioning

confidence: 99%

Payment networks in a search model of money

Martin

Orlando

Skeie

2008

Review of Economic Dynamics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn a simple search model of money, we study a special kind of memory that gives rise to an arrangement resembling a payment network. Specifically, we assume that agents can pay a cost to access a central database that tracks payments made and received. Incentives must be provided to agents to access the central database and to produce when they participate in this arrangement. We also study policies that can loosen these incentive constraints. In particular, we show that a "no-surcharge" rule has good incentive properties. Finally, we compare our model with that of Cavalcanti and Wallace.

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A Model of Private Bank-Note Issue

Cited by 146 publications

References 13 publications

A model of banknote discounts

A model of banknote discounts

A comment on: “Efficient propagation of shocks and the optimal return on money”

Payment networks in a search model of money

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