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A model of private bank-note issue

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  • Ricardo de O. Cavalcanti

    (Department of Economics, Pennsylvania State University and EPGE, Getulio Vargas Foundation)

  • Neil Wallace

    (Department of Economics, Pennsylvania State University)

Abstract

A random-matching model (of money) is formulated in which there is complete public knowledge of the trading histories of a subset of the population, called the banking sector, and no public knowledge of the trading histories of the complement of that subset, called the non bank sector. Each person, whether a banker or a non banker, is assumed to have the technological capability to create indivisible, distinct, and durable objects called notes. If outside money is indivisible and sufficiently scarce, then an optimal mechanism is shown to have note issue and note redemption (destruction) by members of the banking sector. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1998.0044
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 2 (1999)
Issue (Month): 1 (January)
Pages: 104-136

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Handle: RePEc:red:issued:v:2:y:1999:i:1:p:104-136

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Related research

Keywords: inside money; bank notes; matching model;

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References

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  1. Cavalcanti, Ricardo & Erosa, Andres & Temzelides, Ted, . "Private Money and Reserve Management in a Random Matching Model," Working Papers 97-17, University of Iowa, Department of Economics, revised Sep 1997.
  2. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
  3. Neil Wallace & Ruilin Zhou, 1996. "A model of a currency shortage," Working Papers 569, Federal Reserve Bank of Minneapolis.
  4. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
  5. Shi, Shouyong, 1996. "Credit and Money in a Search Model with Divisible Commodities," Review of Economic Studies, Wiley Blackwell, vol. 63(4), pages 627-52, October.
  6. Huggett, Mark & Krasa, Stefan, 1996. "Money and Storage in a Differential Information Economy," Economic Theory, Springer, vol. 8(2), pages 191-210, August.
  7. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February.
  8. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  9. Diamond, Peter, 1990. "Pairwise Credit in Search Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 285-319, May.
  10. Hanson, John R, II, 1979. "Money in the Colonial American Economy: An Extension," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 281-86, April.
  11. Martin Eichenbaum & Neil Wallace, 1985. "A shred of evidence on public acceptance of privately issued currency," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
  12. Aiyagari, S Rao & Wallace, Neil, 1991. "Existence of Steady States with Positive Consumption in the Kiyotaki-Wright Model," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 901-16, October.
  13. Glassman, Debra & Redish, Angela, 1988. "Currency depreciation in early modern England and France," Explorations in Economic History, Elsevier, vol. 25(1), pages 75-97, January.
  14. Klein, Benjamin, 1974. "The Competitive Supply of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(4), pages 423-53, November.
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