The Appearance of Carriers and the Origins of Money
AbstractThe main goal of this essay is to provide microfoundations in a spatial general equilibrium framework for the fact that individuals use money to make transactions, and hence microfoundations for the cash in advance constraint. We analyze the emergence of a monetary economy out of a redistribution barter system where goods are sent to a central market and then redistributed among individuals. We show that, as the population increases beyond a certain point, the barter exchange system becomes too expensive. To reduce the exchange system cost, and as a result of individuals’ rational behavior, a new specialized merchant, the carrier, appears and causes frictions among traders leading to the appearance of money. There are, however, certain conditions for this process to succeed. These conditions concern the economic characteristics of those goods chosen to act as money, and the level of economic development.
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Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0012014.
Length: 36 pages
Date of creation: 12 Feb 2001
Date of revision:
Note: Type of Document - Acrobat PDF; pages: 36 ; figures: included
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Barter; Money; Carrier; Market center; City; Transaction cost;
Other versions of this item:
- Jose Noguera, 2001. "The Appearance of Carriers and the Origins of Money," CERGE-EI Working Papers wp169, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
- R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
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