Advanced Search
MyIDEAS: Login

Launching of a New Currency in a Simple Random Matching Model

Contents:

Author Info

  • Sébastien LOTZ
  • Guillaume ROCHETEAU

Abstract

This paper studies the launching of a new fiat currency within a search-theoretic framework. We show that legal tender laws may not be sufficient to guarantee the acceptability of the new currency, and that the withdrawal of a large fraction of the competing currency is essential to avoid the failure of such a launching. The possibility of converting the old currency into the new one can ease the transition to the new currency only if it is combined with strict legal tender laws. Finally, a network externality is identified that may generate inefficiencies in the conversion decision.

Download Info

If 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.
File URL: http://www.hec.unil.ch/deep/textes/00.10.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 00.10.

as in new window
Length: 46 pages
Date of creation: May 2000
Date of revision:
Publication status: Published in Journal of Money Credit and Banking, vol.34 (3), part 1, 2002, pp. 563-588
Handle: RePEc:lau:crdeep:00.10

Contact details of provider:
Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
Email:
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
More information through EDIRC

Related research

Keywords: money; search; currency reform; legal tender laws;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Francois R. Velde & Warren E. Weber & Randall Wright, 1997. "A model of commodity money, with applications to Gresham's Law and the debasement puzzle," Working Paper Series, Macroeconomic Issues WP-97-12, Federal Reserve Bank of Chicago.
  2. Edward J. Green & Warren E. Weber, 1996. "Will the new $100 bill decrease counterfeiting?," Working Papers 571, Federal Reserve Bank of Minneapolis.
  3. Soller, E.V. & Waller, C., 1997. "A Search Theoretic Model of Legal and Illegal Currency," Papers 97-003, Indiana - Center for Econometric Model Research.
  4. Wright, Randall, 1999. "Comment on Inside and Outside Money as Alternative Media of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 461-68, August.
  5. Caskey, John P & St Laurent, Simon, 1994. "The Susan B. Anthony Dollar and the Theory of Coin/Note Substitutions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 495-510, August.
  6. Craig, B. & Waller, C.J., 1999. "Currency Portfolios and Nominal Exchange Rates in a Dual Currency Search Economy," Papers 9916, London School of Economics - Centre for Labour Economics.
  7. Aiyagari, S. Rao & Wallace, Neil, 1997. "Government Transaction Policy, the Medium of Exchange, and Welfare," Journal of Economic Theory, Elsevier, vol. 74(1), pages 1-18, May.
  8. Craig, Ben, 1999. "Comment on Inside and Outside Money as Alternative Media of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 458-60, August.
  9. Selgin, G., 1993. "On Ensuring the Acceptability of a New Fiat Money," Papers 368, Georgia - College of Business Administration, Department of Economics.
  10. Nobuhiro Kiyotaki & Randall Wright, 1989. "A contribution to the pure theory of money," Staff Report 123, Federal Reserve Bank of Minneapolis.
  11. Berentsen, Aleksander, 1997. "Monetary policy implications of digital money," MPRA Paper 37392, University Library of Munich, Germany.
  12. Jovanovic, Boyan & Rosenthal, Robert W., 1988. "Anonymous sequential games," Journal of Mathematical Economics, Elsevier, vol. 17(1), pages 77-87, February.
  13. Joseph Farrell & Garth Saloner, 1986. "Installed Base and Compatibility, With Implications for Product Preannouncements," Working papers 411, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Li, Yiting & Wright, Randall, 1998. "Government Transaction Policy, Media of Exchange, and Prices," Journal of Economic Theory, Elsevier, vol. 81(2), pages 290-313, August.
  15. Hernán Cortés Douglas & Richard K. Abrams, 1993. "Introduction of a New National Currency," IMF Working Papers 93/49, International Monetary Fund.
  16. Ritter, Joseph A, 1995. "The Transition from Barter to Fiat Money," American Economic Review, American Economic Association, vol. 85(1), pages 134-49, March.
  17. Ben R. Craig & Christopher J. Waller, 2000. "Dual-currency economies as multiple-payment systems," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 2-13.
  18. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lau:crdeep:00.10. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudine Delapierre Saudan).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.