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On the Local Interaction of Money and Credit

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Author Info

  • Yi Jin

    (University of Kansas)

  • Ted Temzelides

    (University of Pittsburgh)

Abstract

We study the coexistence of monetary and credit transactions in a model where exchange is decentralized. Agents belong to different locations which are informationally separated. The equilibrium mix of monetary and credit transactions is characterized as a function of the frequency of meetings among agents from different locations, Credit transactions take place only among a small set of 'neighbors.' Monetary trades emerge only if interactions with faraway locations are sufficiently frequent. Even in that case, trades among nearby locations remain non-monetized. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(03)00055-3
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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): 7 (2004)
Issue (Month): 1 (January)
Pages: 143-156

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Handle: RePEc:red:issued:v:7:y:2004:i:1:p:143-156

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Related research

Keywords: Money and Credit; Local Matching;

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References

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  1. Youngjae Lim & Robert Townsend, 1998. "General Equilibrium Models of Financial Systems: Theory and Measurement in Village Economies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 59-118, January.
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  13. 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.
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  18. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
  19. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
  20. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
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Citations

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Cited by:
  1. Xavier Cuadras-Morató, 2009. "Circulation Of Private Notes During A Currency Shortage," Manchester School, University of Manchester, vol. 77(4), pages 461-478, 07.
  2. Peter Rupert & Martin Schindler & Andrei Shevchenko & Randall Wright, 2000. "The search-theoretic approach to monetary economics: a primer," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 10-28.
  3. Kahn, Charles M. & Roberds, William, 2009. "Why pay? An introduction to payments economics," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 1-23, January.
  4. Ed Nosal & Guillaume Rocheteau, 2006. "The economics of payments," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Feb.
  5. Miquel Faig, 2006. "Divisible Money In An Economy With Villages," Working Papers tecipa-216, University of Toronto, Department of Economics.
  6. Huberto M. Ennis, 2006. "The problem of small change in early Argentina," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 93-111.

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