Money with Bank Networks
We allow banks to choose between two networks in a simple version of the Cavalcanti and Wallace (1999) model of inside money. Members of a network have access to credit but must redeem banknotes issued by other members in random meetings. We find equilibria in which members of a particular network issue more valuable notes, but face the same ex-ante payoff as that of their competition . Banks are shown to be concerned with both credit externalities and with monetary liabilities. When the size of the bank sector is small, these two opposing forces may result in a stable equilibrium.
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- David C. Mills, 2006.
"A model in which outside and inside money are essential,"
Finance and Economics Discussion Series
2006-38, Board of Governors of the Federal Reserve System (U.S.).
- Mills, David C., 2007. "A Model In Which Outside And Inside Money Are Essential," Macroeconomic Dynamics, Cambridge University Press, vol. 11(03), pages 347-366, June.
- Ricardo de O. Cavalcanti & Andres Erosa & Ted Temzelides, 1999.
"Private money and reserve management in a random-matching model,"
Discussion Paper / Institute for Empirical Macroeconomics
128, Federal Reserve Bank of Minneapolis.
- 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.
- Cavalcanti, R. & Erosa, A. & Temzelides, T., 1997. "Private Money and Reserve Management in a Random Matching Model," UWO Department of Economics Working Papers 9715, University of Western Ontario, Department of Economics.
- Ricardo Cavalcanti & Andres Erosa & Ted Temzelides, 1998. "Private Money and Reserve Management in a Random Matching Model," Macroeconomics 9803008, EconWPA.
- Ricardo de O. Cavalcanti & Andres Erosa & Theodosios Temzelides, 1997. "Private money and reserve management in a random matching model," Working Papers 97-24, Federal Reserve Bank of Philadelphia.
- Cavalcanti, Ricardo & Erosa, Andres & Temzelides, Ted, . "Private Money and Reserve Management in a Random Matching Model," Working Papers 97-17, University of Iowa, Department of Economics, revised Sep 1997.
- Ricardo de O. Cavalcanti & Andres Erosa, 1998. "Private Money And Reserve Management In A Random Matching Model," Macroeconomics 9802010, EconWPA.
- Cavalcanti, Ricardo de O & Wallace, Neil, 1999.
"Inside and Outside Money as Alternative Media of Exchange,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 31(3), pages 443-57, August.
- Ricardo de O. Cavalcanti & Neil Wallace, 1999. "Inside and outside money as alternative media of exchange," Proceedings, Federal Reserve Bank of Cleveland, pages 443-468.
- 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.
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