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Optimal money creation in "pure currency" economies: a conjecture

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  • Neil Wallace

Abstract

In a pure-currency economy, money is the only durable object and people have private histories. In such economies, taxation is not feasible and in some of them trade is enhanced through the use of money. For economies of that kind in which a nondegenerate distribution of money, part of the state of the economy, affects trades and real outcomes, and in which trades affect the state at the next date, the conjecture is that there are transfer schemes financed by money creation that improve ex ante representative-agent welfare relative to what can be achieved holding the stock of money fixed. JEL Codes: E52, E58. Copyright 2014, Oxford University Press.

Suggested Citation

  • Neil Wallace, 2014. "Optimal money creation in "pure currency" economies: a conjecture," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 259-274.
    • Handle: RePEc:oup:qjecon:v:129:y:2014:i:1:p:259-274
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    File URL: http://hdl.handle.net/10.1093/qje/qjt030
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    Citations

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    Cited by:

    1. Rocheteau, Guillaume & Weill, Pierre-Olivier & Wong, Russell, 2018. "A tractable model of monetary exchange with ex-post heterogeneity," Theoretical Economics, Econometric Society, vol. 13(3), September.
    2. Gu Jin & Tao Zhu, 2019. "Nonneutrality Of Money In Dispersion: Hume Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(3), pages 1329-1353, August.
    3. repec:hal:spmain:info:hdl:2441/j75mfllkr89c8aod1nr586ksc is not listed on IDEAS
    4. Florin Bilbiie & Xavier Ragot, 2021. "Optimal Monetary Policy and Liquidity with Heterogeneous Households," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 41, pages 71-95, July.
    5. Krishna, R. Vijay & Leukhina, Oksana, 2019. "On the benefits of currency reform," Journal of Economic Dynamics and Control, Elsevier, vol. 102(C), pages 81-95.
    6. Bajaj, Ayushi & Hu, Tai-Wei & Rocheteau, Guillaume & Silva, Mario Rafael, 2017. "Decentralizing constrained-efficient allocations in the Lagos–Wright pure currency economy," Journal of Economic Theory, Elsevier, vol. 167(C), pages 1-13.
    7. Xavier Ragot & Florin O. Bilbiie, 2016. "Monetary Policy, Inflation, and Inequality: The Case for Helicopters," 2016 Meeting Papers 1663, Society for Economic Dynamics.
    8. Kiyotaki, Nobuhiro & Lagos, Ricardo & Wright, Randall, 2016. "Introduction to the symposium issue on money and liquidity," Journal of Economic Theory, Elsevier, vol. 164(C), pages 1-9.
    9. Araujo, Luis & Hu, Tai-Wei, 2018. "Optimal monetary interventions in credit markets," Journal of Economic Theory, Elsevier, vol. 178(C), pages 455-487.
    10. Jung, Kuk Mo, 2018. "Uncertainty-induced dynamic inefficiency and the optimal inflation rate," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 486-506.
    11. Nicola Amendola & Leo Ferraris & Fabrizio Mattesini, 2016. "Optimal Monetary Policy in a Pure Currency Economy with Heterogenous Agents," CEIS Research Paper 394, Tor Vergata University, CEIS, revised 02 Feb 2017.
    12. Huang, Pidong & Igarashi, Yoske, 2015. "Trejos–Wright with a 2-unit bound: Existence and stability of monetary steady states," Mathematical Social Sciences, Elsevier, vol. 73(C), pages 55-62.
    13. Thomas Wiseman, 2015. "A Note on the Essentiality of Money under Limited Memory," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 881-893, October.
    14. Wei Qiao & Neil Wallace, 2021. "Optimal Provision of Costly Currency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(2-3), pages 535-554, March.
    15. Hu, Tai-Wei & Shmaya, Eran, 2019. "Unique monetary equilibrium with inflation in a stationary Bewley–Aiyagari model," Journal of Economic Theory, Elsevier, vol. 180(C), pages 368-382.
    16. Jonathan Chiu & Tsz-Nga Wong, 2015. "On the Essentiality of E-Money," Staff Working Papers 15-43, Bank of Canada.
    17. repec:hal:wpspec:info:hdl:2441/j75mfllkr89c8aod1nr586ksc is not listed on IDEAS
    18. Burdett, Kenneth & Trejos, Alberto & Wright, Randall, 2017. "A new suggestion for simplifying the theory of money," Journal of Economic Theory, Elsevier, vol. 172(C), pages 423-450.
    19. Huang, Pidong & Igarashi, Yoske, 2014. "The instability of some non-full-support steady states in a random matching model of money," Journal of Mathematical Economics, Elsevier, vol. 55(C), pages 177-185.
    20. Wataru Nozawa & Hoonsik Yang, 2018. "Optimal Inflation in a Model of Inside Money: a Further Result," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 137-150, May.
    21. Yu Awaya & Kohei Iwasaki & Makoto Watanabe, 2024. "Money Is the Root of Asset Bubbles," CESifo Working Paper Series 10923, CESifo.
    22. Maria Bigoni & Gabriele Camera & Marco Casari, 2019. "Cooperation among strangers with and without a monetary system," Working Papers 19-01, Chapman University, Economic Science Institute.
    23. Jonathan Chiu & Tsz-Nga Wong, 2015. "On the Essentiality of E-Money," Staff Working Papers 15-43, Bank of Canada.

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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