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On the Local Interaction of Money and Credit

Author

Listed:
  • Yi Jin

    (University of Kansas)

  • Ted Temzelides

    (University of Pittsburgh)

Abstract

We study the coexistence of monetary and credit transactions in a model where exchange is decentralized. Agents belong to different locations which are informationally separated. The equilibrium mix of monetary and credit transactions is characterized as a function of the frequency of meetings among agents from different locations, Credit transactions take place only among a small set of 'neighbors.' Monetary trades emerge only if interactions with faraway locations are sufficiently frequent. Even in that case, trades among nearby locations remain non-monetized. (Copyright: Elsevier)

Suggested Citation

  • Yi Jin & Ted Temzelides, 2004. "On the Local Interaction of Money and Credit," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 143-156, January.
  • Handle: RePEc:red:issued:v:7:y:2004:i:1:p:143-156
    DOI: 10.1016/S1094-2025(03)00055-3
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    Cited by:

    1. Miquel Faig, 2004. "Divisible Money in an Economy with Villages," Levine's Bibliography 122247000000000159, UCLA Department of Economics.
    2. Leo Ferraris & Fabrizio Mattesini, 2020. "Money and Collateral," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(7), pages 1617-1644, October.
    3. Peter Rupert & Martin Schindler & Andrei Shevchenko & Randall Wright, 2000. "The search-theoretic approach to monetary economics: a primer," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 10-28.
    4. Xavier Cuadras‐Morató, 2009. "Circulation Of Private Notes During A Currency Shortage," Manchester School, University of Manchester, vol. 77(4), pages 461-478, July.
    5. Huberto M. Ennis, 2006. "The problem of small change in early Argentina," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 92(Spr), pages 93-111.
    6. 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.
    7. Ed Nosal & Guillaume Rocheteau, 2006. "The economics of payments," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Feb.
    8. Kahn, Charles M. & Roberds, William, 2009. "Why pay? An introduction to payments economics," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 1-23, January.
    9. Araujo, Luis & Camargo, Braz, 2015. "Limited monitoring and the essentiality of money," Journal of Mathematical Economics, Elsevier, vol. 58(C), pages 32-37.

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    More about this item

    Keywords

    Money and Credit; Local Matching;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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