Inside and Outside Money as Alternative Media of Exchange

Cavalcanti, Ricardo de Oliveira; Wallace, Neil

doi:10.2307/2601062

Cited by 183 publications

(159 citation statements)

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“…12 An alternative is to use a mechanism-design approach similar to Calvalcanti and Wallace (1999) where in a fraction of trades, the government chooses a trading mechanism to maximize the incentives to accumulate the domestic currency, while the remaining trades with private sellers are determined using a pricing mechanism such as bargaining, price posting, or competitive pricing.…”

Section: Centralized Market (Cm) Value Functionsmentioning

confidence: 99%

An information-based theory of international currency

Zhang

2014

Journal of International Economics

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This paper develops an information-based theory of international currency based on search frictions, private trading histories, and imperfect recognizability of assets. Using an openeconomy search model with multiple competing currencies, the value of each currency is determined without requiring agents to use a particular currency to purchase a country's goods. Strategic complementarities in portfolio choices and information acquisition decisions generate multiple equilibria with different types of payment arrangements. While some inflation can benefit the country issuing an international currency, the threat of losing international status puts an inflation discipline on the issuing country. When monetary authorities interact in a simple policy game, the temptation to inflate can lead optimal policy to deviate from the Friedman rule. A calibration of the generalized model shows that for the U.S. dollar, the welfare cost of losing international status ranges from 1.3% to 2.1% of GDP per year.

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Section: Centralized Market (Cm) Value Functionsmentioning

confidence: 99%

An information-based theory of international currency

Zhang

2014

Journal of International Economics

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“…5 We will demonstrate in this In our model we …nd that when these default-free intermediaries o¤er credit lines to the consumers in our economy and play a trigger strategy -withdrawing credit in case of consumer default -the intermediaries make it possible for the economy to reach the …rst-best, if:…”

Section: Default Free Intermediariesmentioning

confidence: 79%

An Idealized View of Financial Intermediation

Sissoko

2007

SSRN Journal

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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 Abstract:Using the monetary model developed in Sissoko (2007), where the general equilibrium assumption that every agent buys and sells simultaneously is relaxed, we observe that in this environment fiat money can implement a Pareto optimum only if taxes are type-specific. We then consider intermediated money by assuming that financial intermediaries whose liabilities circulate as money have an important identifying characteristic: they are widely viewed as default-free. The paper demonstrates that default-free intermediaries who issue credit lines to consumers can resolve the monetary problem and make it possible for the economy to reach a Pareto optimum. We argue that our idealized concept of financial intermediation is a starting point for studying the monetary use of credit. JEL: E5, G2Keywords : Fiat Money, Cash-in-advance, Financial Intermediation Correspondence: Occidental College, Economics Department, 1600 Campus Road, Los Angeles, CA 90041 phone: 323-259-2932, fax: 323-259-2704, e-mail: csissoko@oxy.edu *Neil Wallace, Chris Waller and an anonymous referee gave me invaluable comments while developing this paper. I also thank Jim Bullard, Gabriele Camera, Ricardo Cavalcanti, Lee Ohanian, Joe Ostroy, Shouyong Shi, Ross Starr, Ted Temzelides, Aaron Tornell, Randy Wright and seminar participants at the Office of the Comptroller of the Currency for helpful comments. All errors are, of course, my own.

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“…The implementation scheme described below builds on the fact that: [1] type-1 agents can commit; [2] output is observable; and [3] that there is a public-access record-keeping device. There are potentially many ways to implement the efficient allocation.…”

Section: The Ex Ante Efficient Allocationmentioning

confidence: 99%

Money, intermediation, and banking

Andolfatto

Nosal

2009

Journal of Monetary Economics

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The business of money creation is conceptually distinct from that of intermediation. Yet, these two activities are frequently-but not always-combined together in the form of a banking system. We develop a simple model to examine the question: When is banking essential? There is a role for money due to a lack of record-keeping and a role for intermediation due to the existence of private information: both money and intermediation are essential. When monitoring costs associated with intermediation are sufficiently low, the two activities can be separated from one another. However, when monitoring costs are sufficiently high, a banking system that combines these two activities is essential.

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Inside and Outside Money as Alternative Media of Exchange

Cited by 183 publications

References 0 publications

An information-based theory of international currency

An information-based theory of international currency

An Idealized View of Financial Intermediation

Money, intermediation, and banking

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