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Commodity Money in a Convex Trading Post Sequence Economy

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  • Starr, Ross M.

Abstract

General equilibrium is investigated with N commodities deliverable at T dates traded spot and futures at ½ N 2T 3 dated commodity-pairwise trading posts. Trade is a resource-using activity recovering transaction costs through the spread between (bid) wholesale) and ask (retail) prices (pairwise rates of exchange). Budget constraints are enforced at each trading post separately implying demand for a carrier of value between trading posts and over time, commodity money (spot or futures). Trade in media of exchange and stores of value is the difference between gross and net inter-post trades. “Demand for ‘money’” is stocks held for retrade.

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  • Starr, Ross M., 2008. "Commodity Money in a Convex Trading Post Sequence Economy," University of California at San Diego, Economics Working Paper Series qt2s87k9cj, Department of Economics, UC San Diego.
    • Handle: RePEc:cdl:ucsdec:qt2s87k9cj
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    References listed on IDEAS

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    1. Frank Hahn, 1973. "On Transaction Costs, Inessential Sequence Economies and Money," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(4), pages 449-461.
    2. Hahn, F H, 1971. "Equilibrium with Transaction Costs," Econometrica, Econometric Society, vol. 39(3), pages 417-439, May.
    3. Dror Goldberg, 2012. "The tax-foundation theory of fiat money," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(2), pages 489-497, June.
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    5. Ross M. Starr, 2003. "Why is there money? Endogenous derivation of `money' as the most liquid asset: a class of examples," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 455-474, March.
    6. 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.
    7. Foley, Duncan K., 1970. "Economic equilibrium with costly marketing," Journal of Economic Theory, Elsevier, vol. 2(3), pages 276-291, September.
    8. Starr, Ross M., 2008. "Mengerian saleableness and commodity money in a Walrasian trading post example," Economics Letters, Elsevier, vol. 100(1), pages 35-38, July.
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