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The Appearance of Carriers and the Origins of Money

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  • Jose Noguera

Abstract

The purpose of this essay is to analyze the circumstances where a monetary economy dominates over a redistributive barter economy in which there is not an absence of double coincidence of wants problem. For this purpose, we develop a spatial general equilibrium model where individuals must trade with intermediaries to acquire the consumption goods that they need; exchange is costly, there is no trust, and individuals act in their own interest to maximize their utilities. The model is also used to address a number of issues in monetary economics like explaining the historical emergence of commodity-money, valued fiat money, the welfare-enhancing role of money, equilibria with several mediums of exchange, and split between the utility and the medium of exchange value of the good that serves as a medium of exchange. It also provides some interesting links between the monetary and urban economics literatures.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp169.

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Date of creation: Jan 2001
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Handle: RePEc:cer:papers:wp169

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Keywords: barter; medium of exchange; city size; carrier; merchant; transaction cost;

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References

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  1. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 927-54, August.
  2. Jose Noguera S., 2001. "Barter Economies and Centralized Merchants," Macroeconomics, EconWPA 0012015, EconWPA.
  3. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262561476, December.
  4. Gale, Douglas, 1978. "The core of a monetary economy without trust," Journal of Economic Theory, Elsevier, Elsevier, vol. 19(2), pages 456-491, December.
  5. Howitt, Peter & Clower, Robert, 2000. "The emergence of economic organization," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 41(1), pages 55-84, January.
  6. Berliant, Marcus & Konishi, Hideo, 2000. "The endogenous formation of a city: population agglomeration and marketplaces in a location-specific production economy," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 30(3), pages 289-324, May.
  7. Laidler, D., 1996. "Notes on the Microfoundations of Monetary Economics," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9610, University of Western Ontario, Department of Economics.
  8. Hicks, John, 1989. "A Market Theory of Money," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198287247, October.
  9. Jack Ochs & John Duffy, 1999. "Emergence of Money as a Medium of Exchange: An Experimental Study," American Economic Review, American Economic Association, American Economic Association, vol. 89(4), pages 847-877, September.
  10. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, American Economic Association, vol. 83(1), pages 63-77, March.
  11. Fujita, Masahisa, 1988. "A monopolistic competition model of spatial agglomeration : Differentiated product approach," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 18(1), pages 87-124, February.
  12. Hicks, J. R., 1969. "A Theory of Economic History," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198811633, October.
  13. Anas, Alex & Xu, Rong, 1999. "Congestion, Land Use, and Job Dispersion: A General Equilibrium Model," Journal of Urban Economics, Elsevier, vol. 45(3), pages 451-473, May.
  14. Clower, Robert W, 1995. "On the Origin of Monetary Exchange," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 33(4), pages 525-36, October.
  15. Anas, Alex, 1992. "On the birth and growth of cities: : Laissez-faire and planning compared," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 22(2), pages 243-258, June.
  16. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 18(2), pages 203-20, April.
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