Secondary currency: An empirical analysis
Many cases exist of multiple currency usage throughout history. As two leading examples, secondary currencies were widespread during both the Great Depression in the United States and the 2002 recession in Argentina. What are the determinants of multiple currency usage and what is the effect on economic activity? Both issues are empirically addressed using individual-level surveys collected by the authors in Argentina during 2002 and 2003. The evidence supports the theoretically predicted determinants of secondary currency acceptability put forth in monetary theory. In particular, findings show that the acceptability of the secondary currency increases when the supply of national currency is low, the relative transaction cost of the secondary currency is low, and the individual trading technologies are less effective. Moreover the acceptability of the secondary currency has real effects on economic activity. Among those who use the secondary currency the monthly income gain is more than 15% of the average Argentine's monthly income. Excluding trades of used goods, this amounts to a 0.6% increase in GDP.
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.:
- Mankiw, N Gregory, 1990.
"A Quick Refresher Course in Macroeconomics,"
Journal of Economic Literature,
American Economic Association, vol. 28(4), pages 1645-1660, December.
- James J. Heckman & Hidehiko Ichimura & Petra Todd, 1998. "Matching As An Econometric Evaluation Estimator," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 261-294.
- Andrei Shevchenko & Randall Wright, 2002.
"A simple search model of money with heterogeneous agents and partial acceptability,"
0207, Federal Reserve Bank of Cleveland.
- Andrei Shevchenko & Randall Wright, 2004. "A simple search model of money with heterogeneous agents and partial acceptability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(4), pages 877-885, November.
- Soller Curtis, Elisabeth & Waller, Christopher J., 2000.
"A search-theoretic model of legal and illegal currency,"
Journal of Monetary Economics,
Elsevier, vol. 45(1), pages 155-184, February.
- Soller, E.V. & Waller, C., 1997. "A Search Theoretic Model of Legal and Illegal Currency," Papers 97-003, Indiana - Center for Econometric Model Research.
- Hunt, Jennifer, 1999.
"Determinants of Non-Employment and Unemployment Durations in East Germany,"
CEPR Discussion Papers
2182, C.E.P.R. Discussion Papers.
- Jennifer Hunt, 1999. "Determinants of Non-employment and Unemployment Durations in East Germany," NBER Working Papers 7128, National Bureau of Economic Research, Inc.
- Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
- Harold L. Cole & Timothy J. Kehoe, 1998.
"Self-fulfilling debt crises,"
211, Federal Reserve Bank of Minneapolis.
- Kiminori Matsuyama & Nobuhiro Kiyotaki & Akihiko Matsui, 1993.
"Toward a Theory of International Currency,"
Review of Economic Studies,
Oxford University Press, vol. 60(2), pages 283-307.
- Wallace, Neil & Zhou, Ruilin, 1997.
"A model of a currency shortage,"
Journal of Monetary Economics,
Elsevier, vol. 40(3), pages 555-572, December.
- Roberto Agodini & Mark Dynarski, 2004. "Are Experiments the Only Option? A Look at Dropout Prevention Programs," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 180-194, February.
- Calvo, Guillermo & Vegh, Carlos, 1992.
"Currency Substitution in Developing Countries: An Introduction,"
20338, University Library of Munich, Germany.
- Guillermo Calvo & Carlos A. VÃ©gh Gramont, 1992. "Currency Substitution in Developing Countries; An Introduction," IMF Working Papers 92/40, International Monetary Fund.
- MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
- Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
- Jack Ochs & John Duffy, 1999. "Emergence of Money as a Medium of Exchange: An Experimental Study," American Economic Review, American Economic Association, vol. 89(4), pages 847-877, September.
- Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
- 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.
- Bertrand, Marianne & Schoar, Antoinette, 2003.
"Managing With Style: The Effect of Managers on Firm Policies,"
4280-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1169-1208.
- Marimon, Ramon & McGrattan, Ellen & Sargent, Thomas J., 1990. "Money as a medium of exchange in an economy with artificially intelligent agents," Journal of Economic Dynamics and Control, Elsevier, vol. 14(2), pages 329-373, May.
- Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
- Craig, Ben & Waller, C.J.Christopher J., 2004. "Dollarization and currency exchange," Journal of Monetary Economics, Elsevier, vol. 51(4), pages 671-689, May.
When requesting a correction, please mention this item's handle: RePEc:eee:moneco:v:56:y:2009:i:3:p:295-308. 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: (Dana Niculescu)
If references are entirely missing, you can add them using this form.