On the Coexistence of Money and Bonds
AbstractThis paper re-examines the so-called coexistence puzzle in terms of a modified version of the legal restrictions hypothesis initially put forth by Bryant and Wallace (1980). The modification is in terms of dropping a questionable assumption in the original hypothesis; i.e., that large denomination government bonds cannot be intermediated by private banks. This restriction is replaced by one that is arguably more palatable; i.e., that the intermediated monetary instruments created by private banks are not universally acceptable as payment for all exchanges (unlike government money). The friction that gives rise to this latter restriction is one that is commonly employed in monetary models where fiat money is essential for exchange.
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 InfoPaper provided by EconWPA in its series Macroeconomics with number 0502020.
Length: 16 pages
Date of creation: 09 Feb 2005
Date of revision:
Note: Type of Document - pdf; pages: 16
Contact details of provider:
Web page: http://184.108.40.206
Other versions of this item:
- E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-DGE-2005-04-16 (Dynamic General Equilibrium)
- NEP-MAC-2005-04-16 (Macroeconomics)
- NEP-MON-2005-04-16 (Monetary Economics)
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.:
- John Bryant & Neil Wallace, 1980. "A suggestion for further simplifying the theory of money," Staff Report 62, Federal Reserve Bank of Minneapolis.
- Richard C.K.Burdekin & Marc D.Weidenmier, 2002.
"Interest-Bearing Currency and Legal Restrictions Theory:Lessons from the Southern Confederacy,"
Cato Journal, Cato Institute, vol. 22(2), pages 199-209, Fall.
- Richard C.K. Burdekin & Marc D. Weidenmier, . "Interest-Bearing Currency and Legal Restrictions Theory: Lessons from the Southern Confederacy," Claremont Colleges Working Papers 1999-14, Claremont Colleges.
- Robert B. Litterman, 1982.
"Optimal Control of the Money Supply,"
NBER Working Papers
0912, National Bureau of Economic Research, Inc.
- Camera, G. & Noussair, C. & Tucker, S., 2000.
"Rate-of-Return Dominance and Efficiency in an Experimental Economy,"
Purdue University Economics Working Papers
1135, Purdue University, Department of Economics.
- Gabriele Camera & Charles Noussair & Steven Tucker, 2003. "Rate-of-return dominance and efficiency in an experimental economy," Economic Theory, Springer, vol. 22(3), pages 629-660, October.
- Noussair, C.N. & Camera , G. & Tucker, S., 2003. "Rate of return dominance and efficiency in an experimental economy," Open Access publications from Tilburg University urn:nbn:nl:ui:12-377947, Tilburg University.
- White, Lawrence H, 1987. "Accounting for Non-interest-Bearing Currency: A Critique of the Legal Restrictions Theory of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(4), pages 448-56, November.
- Rao Aiyagari, S. & Wallace, Neil & Wright, Randall, 1996.
"Coexistence of money and interest-bearing securities,"
Journal of Monetary Economics,
Elsevier, vol. 37(3), pages 397-419, June.
- S. Rao Aiyagari & Neil Wallace & Randall Wright, 1996. "Coexistence of money and interest-bearing securities," Working Papers 550, Federal Reserve Bank of Minneapolis.
- Bruce D. Smith, 2003. "Taking intermediation seriously," Proceedings, Federal Reserve Bank of Cleveland, pages 1319-1377.
- Makinen, Gail E & Woodward, G Thomas, 1986. "Some Anecdotal Evidence Relating to the Legal Restrictions Theory of the Demand for Money," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 260-65, April.
- Neil Wallace, 1983. "A legal restrictions theory of the demand for "money" and the role of monetary policy," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
- Cowen, Tyler & Kroszner, Randall, 1989. "Scottish Banking before 1845: A Model for Laissez-Faire?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 221-31, May.
- Andolfatto, David & Nosal, Ed, 2009.
"Money, intermediation, and banking,"
Journal of Monetary Economics,
Elsevier, vol. 56(3), pages 289-294, April.
- Arthur J. Rolnick & Warren E. Weber, 1982. "Free banking, wildcat banking, and shinplasters," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Deep money, the coexistence puzzle, and the legal restrictions hypothesis
by JP Koning in Moneyness on 2014-05-24 03:31:00
Cited by:reading list or among the top items on IDEAS.Access and download statisticsgeneral 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: (EconWPA).
If references are entirely missing, you can add them using this form.