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Capital in the Payments System


  • Marquis, Milton H
  • Reffett, Kevin L


Capital is required to support the payments system in modern economies with well developed financial markets. Financial innovations raise the marginal product of capital in this usage. This suggests that there are general equilibrium consequences associated with an optimal selection of a payments system that includes barter, money, and a capital-based accounting system. In this paper, goods are differentiated with respect to the medium of exchange associated with their acquisition, which is endogenously determined as a consequence of explicit trading frictions. The response of the economy to endowment, production, and payments system shocks, including financial innovations, is examined. Copyright 1992 by The London School of Economics and Political Science.

Suggested Citation

  • Marquis, Milton H & Reffett, Kevin L, 1992. "Capital in the Payments System," Economica, London School of Economics and Political Science, vol. 59(235), pages 351-364, August.
  • Handle: RePEc:bla:econom:v:59:y:1992:i:235:p:351-64

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    References listed on IDEAS

    1. Amartya Sen, 2005. "Walsh on Sen after Putnam," Review of Political Economy, Taylor & Francis Journals, vol. 17(1), pages 107-113.
    2. Morishima, Michio, 1974. "Marx in the Light of Modern Economic Theory," Econometrica, Econometric Society, vol. 42(4), pages 611-632, July.
    3. Vivian Walsh, 2003. "Sen after Putnam," Review of Political Economy, Taylor & Francis Journals, vol. 15(3), pages 315-394.
    4. Morishima, Michio, 1978. ""Marx in the Light of Modern Economic Theory": A Reply," Econometrica, Econometric Society, vol. 46(5), pages 1243-1243, September.
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    Cited by:

    1. Lacker, Jeffrey M. & Schreft, Stacey L., 1996. "Money and credit as means of payment," Journal of Monetary Economics, Elsevier, vol. 38(1), pages 3-23, August.
    2. Milton H. Marquis, 2001. "Inflation taxes, financial intermediation, and home production," Working Paper Series 2001-04, Federal Reserve Bank of San Francisco.
    3. Gordon, David B. & Leeper, Eric M. & Zha, Tao, 1998. "Trends in velocity and policy expectations," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 49(1), pages 265-304, December.
    4. Norrbin, Stefan C. & Reffett, Kevin L., 1995. "Trade credit in a monetary economy," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 413-430, June.

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