A Signaling Model of Multiple Currencies
AbstractIn this paper, we demonstrate that it may be socially optimal for countries to have different currencies, even though they have no possibility of independently controlling their money supplies. We assume that agents have heterogeneous preferences over goods of different national origin, and that these preferences are private information. We prove three results. First, for a range of parameters, it is optimal for different countries to have different currencies so that buyers can more efficiently signal their preferences over goods to sellers. Second, if it is socially optimal to have different national currencies, then it is socially optimal for sellers to sell lower quantities to buyers bearing foreign currency. Finally, it is only necessary to have two monies if cross-country trade is optimal. (Copyright: Elsevier)
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 2 (1999)
Issue (Month): 1 (January)
Contact details of provider:
Postal: Review of Economic Dynamics Academic Press Editorial Office 525 "B" Street, Suite 1900 San Diego, CA 92101
Web page: http://www.EconomicDynamics.org/review.htm
More information through EDIRC
Find related papers by JEL classification:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Townsend, Robert M, 1987. "Economic Organization with Limited Communication," American Economic Review, American Economic Association, vol. 77(5), pages 954-71, December.
- Nobuhiro Kiyotaki & Randall Wright, 1989.
"A contribution to the pure theory of money,"
123, Federal Reserve Bank of Minneapolis.
- 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.
- S. Rao Aiyagari & Neil Wallace, 1991. "Existence of steady states with positive consumption in the Kiyotaki-Wright model," Working Papers 428, Federal Reserve Bank of Minneapolis.
- Antoine Martin, 2002.
"Endogenous multiple currencies,"
Research Working Paper
RWP 02-03, Federal Reserve Bank of Kansas City.
- Rajshri Jayaraman & Mandar Oak, 2003.
"The Signaling Role of Municipal Currencies in Local Development,"
CESifo Working Paper Series
913, CESifo Group Munich.
- Rajshri Jayaraman & Mandar Oak, 2005. "The Signalling Role of Municipal Currencies in Local Development," Economica, London School of Economics and Political Science, vol. 72(288), pages 597-613, November.
- Ravikumar, B & Wallace, Neil, 2002. "A benefit of uniform currency," MPRA Paper 22951, University Library of Munich, Germany.
- Dong, Mei & Jiang, Janet Hua, 2010.
"One or two monies?,"
Journal of Monetary Economics,
Elsevier, vol. 57(4), pages 439-450, May.
- Ould Ahmed, Pepita & Marques-Pereira, Jaime & Le Maux, Laurent & Desmedt, Ludovic & Blanc, Jerome & Théret, Bruno, 2013. "Monetary plurality in economic theory," Economics Papers from University Paris Dauphine 123456789/11496, Paris Dauphine University.
- Manjong Lee, 2008. "Is Uniform Money Always Better than Separate Monies?," Open Economies Review, Springer, vol. 19(1), pages 21-42, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If references are entirely missing, you can add them using this form.