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A model of private bank-note issue

Author

Listed:
  • Ricardo de O. Cavalcanti

    (Pennsylvania State University and EPGE, Getulio Vargas Foundation)

  • Neil Wallace

    (Pennsylvania State University)

Abstract

A random-matching model (of money) is formulated in which there is complete public knowledge of the trading histories of a subset of the population, called the banking sector, and no public knowledge of the trading histories of the complement of that subset, called the non bank sector. Each person, whether a banker or a non banker, is assumed to have the technological capability to create indivisible, distinct, and durable objects called notes. If outside money is indivisible and sufficiently scarce, then an optimal mechanism is shown to have note issue and note redemption (destruction) by members of the banking sector. (Copyright: Elsevier)

Suggested Citation

  • Ricardo de O. Cavalcanti & Neil Wallace, 1999. "A model of private bank-note issue," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 104-136, January.
  • Handle: RePEc:red:issued:v:2:y:1999:i:1:p:104-136
    DOI: 10.1006/redy.1998.0044
    as

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    References listed on IDEAS

    as
    1. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
    2. Ricardo de O. Cavalcanti & Andres Erosa & Ted Temzelides, 1999. "Private Money and Reserve Management in a Random-Matching Model," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 929-945, October.
    3. Shouyong Shi, 1996. "Credit and Money in a Search Model with Divisible Commodities," Review of Economic Studies, Oxford University Press, vol. 63(4), pages 627-652.
    4. Peter Diamond, 1990. "Pairwise Credit in Search Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 285-319.
    5. 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.
    6. Huggett, Mark & Krasa, Stefan, 1996. "Money and Storage in a Differential Information Economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 191-210, August.
    7. Wallace, Neil & Zhou, Ruilin, 1997. "A model of a currency shortage," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 555-572, December.
    8. Glassman, Debra & Redish, Angela, 1988. "Currency depreciation in early modern England and France," Explorations in Economic History, Elsevier, vol. 25(1), pages 75-97, January.
    9. S. Rao Aiyagari & Neil Wallace, 1991. "Existence of Steady States with Positive Consumption in the Kiyotaki-Wright Model," Review of Economic Studies, Oxford University Press, vol. 58(5), pages 901-916.
    10. Klein, Benjamin, 1974. "The Competitive Supply of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(4), pages 423-453, November.
    11. Narayana R. Kocherlakota & Neil Wallace, 1997. "Optimal allocations with incomplete record-keeping and no commitment," Working Papers 578, Federal Reserve Bank of Minneapolis.
    12. Shi Shougong, 1995. "Money and Prices: A Model of Search and Bargaining," Journal of Economic Theory, Elsevier, vol. 67(2), pages 467-496, December.
    13. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-141, February.
    14. Hanson, John R, II, 1979. "Money in the Colonial American Economy: An Extension," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 281-286, April.
    15. Martin Eichenbaum & Neil Wallace, 1985. "A shred of evidence on public acceptance of privately issued currency," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    inside money; bank notes; matching model;

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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