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The demonetization of gold: transactions and the change in control

Listed author(s):
  • Thomas Quint
  • Martin Shubik

    ()

Three models of a monetary economy are considered, in order to show the effects of a gold demonetization: the first with a gold money, the second with demonetized gold but no central bank, and the third with demonetized gold, but with a central bank. The distinctions between ownership and control are discussed. Our results show a gain in efficiency (in the case of “enough money”) when a switch is made from a durable commodity money to a fiat money. This is due to players being able to enjoy both the full service value of gold and transactions value of money—something that cannot be done in the original model with gold money. When we further add in the central bank, there is a somewhat further efficiency gain in the case of “not enough money”. We close the paper with a discussion of the usefulness of central banks. Copyright Springer-Verlag Berlin Heidelberg 2015

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File URL: http://hdl.handle.net/10.1007/s10436-013-0247-0
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Article provided by Springer in its journal Annals of Finance.

Volume (Year): 11 (2015)
Issue (Month): 1 (February)
Pages: 109-149

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Handle: RePEc:kap:annfin:v:11:y:2015:i:1:p:109-149
DOI: 10.1007/s10436-013-0247-0
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/finance/journal/10436/PS2

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  1. Sorin, Sylvain, 1996. "Strategic Market Games with Exchange Rates," Journal of Economic Theory, Elsevier, vol. 69(2), pages 431-446, May.
  2. Martin Shubik, 2000. "The Theory of Money," Working Papers 00-03-021, Santa Fe Institute.
  3. Thomas Quint & Martin Shubik, 2009. "Multistage Models of Monetary Exchange: An Elementary Discussion of Commodity Money, Fiat Money and Credit, Part 4," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 6-67, February.
  4. Dubey, Pradeep & Shapley, Lloyd S., 1994. "Noncooperative general exchange with a continuum of traders: Two models," Journal of Mathematical Economics, Elsevier, vol. 23(3), pages 253-293, May.
  5. Dubey, Pradeep & Mas-Colell, Andreau & Shubik, Martin, 1980. "Efficiency properties of strategies market games: An axiomatic approach," Journal of Economic Theory, Elsevier, vol. 22(2), pages 339-362, April.
  6. Martin Angerer & Juergen Huber & Martin Shubik & Shyam Sunder, 2010. "An economy with personal currency: theory and experimental evidence," Annals of Finance, Springer, vol. 6(4), pages 475-509, October.
  7. Sahi, Siddhartha & Yao, Shuntian, 1989. "The non-cooperative equilibria of a trading economy with complete markets and consistent prices," Journal of Mathematical Economics, Elsevier, vol. 18(4), pages 325-346, September.
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