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Endogenous Multiple Currencies

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  • Martin, Antoine

Abstract

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.

Suggested Citation

  • Martin, Antoine, 2006. "Endogenous Multiple Currencies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 245-262, February.
    • Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:1:p:245-262
    DOI: 10.1353/mcb.2006.0019
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    2. Waknis, Parag, 2017. "Competitive Supply of Money in a New Monetarist Model," MPRA Paper 75401, University Library of Munich, Germany.
    3. Zhang, Cathy, 2014. "An information-based theory of international currency," Journal of International Economics, Elsevier, vol. 93(2), pages 286-301.
    4. Yu Zhu & Scott Hendry, 2019. "A Framework for Analyzing Monetary Policy in an Economy with E-money," Staff Working Papers 19-1, Bank of Canada.

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