Endogenous Multiple Currencies
In this paper I study a model in which households can decide which currency or currencies they will accept. I provide a simple set of assumptions that are sufficient to prevent the indeterminacy of the exchange rate in the sense of Kareken and Wallace (1981). In a two-country model, stable equilibria have either a single currency or national currencies. I also show currency substitution occurs as an endogenous response to high growth in the stock of a currency.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 38 (2006)
Issue (Month): 1 (February)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879|
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.:
- Alan C. Stockman, 1978.
"A Theory of Exchange Rate Determination,"
UCLA Economics Working Papers
122, UCLA Department of Economics.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1984.
"Money and Interest in Cash-In-Advance Economy,"
628, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Tandon, Ajay & Wang, Yong, 1999. "Inflationary Finance, Capital Controls, and Currency Substitution," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 597-612, November.
- Fisher, Eric O'N., 1999. "On exchange rates and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 23(5-6), pages 851-872, April.
- Matsui, Akihiko, 1998.
"Strong Currency and Weak Currency,"
Journal of the Japanese and International Economies,
Elsevier, vol. 12(4), pages 305-333, December.
- Russell W. Cooper & Hubert Kempf, 2000.
"Designing Stabilization Policy in a Monetary Union,"
NBER Working Papers
7607, National Bureau of Economic Research, Inc.
- Russell W. Cooper & Hubert Kempf, 2000. "Designing stabilization policy in a monetary union," Working Paper 0001, Federal Reserve Bank of Cleveland.
- Russell Cooper & Hubert Kempf, 2000. "Designing Stabilization Policy in a Monetary Union," Boston University - Institute for Economic Development 99, Boston University, Institute for Economic Development.
- Russell Cooper & Hubert Kempf, 2000. "Designing Stabilization Policy in a Monetary Union," Econometric Society World Congress 2000 Contributed Papers 0529, Econometric Society.
- Chang, Roberto, 1994.
"Endogenous Currency Substitution, Inflationary Finance, and Welfare,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 26(4), pages 903-16, November.
- Chang, Roberto, 1989. "Endogenous Currency Substitution, Inflationary Finance, And Welfare," Working Papers 89-12, C.V. Starr Center for Applied Economics, New York University.
- Ireland, Peter N, 1994. "Money and Growth: An Alternative Approach," American Economic Review, American Economic Association, vol. 84(1), pages 47-65, March.
- Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
- Ireland, Peter N., 1994. "Economic growth, financial evolution, and the long-run behavior of velocity," Journal of Economic Dynamics and Control, Elsevier, vol. 18(3-4), pages 815-848.
- John Kareken & Neil Wallace, 1981. "On the Indeterminacy of Equilibrium Exchange Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 96(2), pages 207-222.
- Martin Uribe, 1995.
"Hysteresis in a simple model of currency substitution,"
International Finance Discussion Papers
509, Board of Governors of the Federal Reserve System (U.S.).
- Uribe, Martin, 1997. "Hysteresis in a simple model of currency substitution," Journal of Monetary Economics, Elsevier, vol. 40(1), pages 185-202, September.
- Narayana Kocherlakota & Thomas Krueger, 1999. "A Signaling Model of Multiple Currencies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 231-244, January.
- Lihong Liu & Anne Sibert, 1996.
"Government Finance with Currency Substitution,"
Archive Discussion Papers
9609, Birkbeck, Department of Economics, Mathematics & Statistics.
- Scott Freeman & Finn E. Kydland, 1998.
"Monetary aggregates and output,"
1998-013, Federal Reserve Bank of St. Louis.
- King, Robert G. & Wallace, Neil & Weber, Warren E., 1992. "Nonfundamental uncertainty and exchange rates," Journal of International Economics, Elsevier, vol. 32(1-2), pages 83-108, February.
- Minford, Patrick, 1995. "Other people's money: Cash-in-advance microfoundations for optimal currency areas," Journal of International Money and Finance, Elsevier, vol. 14(3), pages 427-440, June.
- Boyer, Russell S. & Kingston, Geoffrey H., 1987. "Currency substitution under finance constraints," Journal of International Money and Finance, Elsevier, vol. 6(3), pages 235-250, September.
- Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-20, April.
- Helpman, Elhanan, 1981.
"An Exploration in the Theory of Exchange-Rate Regimes,"
3445091, Harvard University Department of Economics.
- Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 865-90, October.
- Schreft, Stacey L., 1992.
"Welfare-improving credit controls,"
Journal of Monetary Economics,
Elsevier, vol. 30(1), pages 57-72, October.
- 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.
- Sturzenegger, Federico, 1997. "Understanding the welfare implications of currency substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 21(2-3), pages 391-416.
- Ravikumar, B & Wallace, Neil, 2002. "A benefit of uniform currency," MPRA Paper 22951, University Library of Munich, Germany.
- Ruilin Zhou, 1997. "Currency Exchange in a Random Search Model," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 289-310.
When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:38:y:2006:i:1:p:245-262. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.