Endogenous multiple currencies
I study a model of multiple currencies in which sellers can choose the currency they will accept. I provide conditions that are necessary and sufficient to avoid indeterminacy of the exchange rate. Under these assumptions, all stable equilibria have the property that all sellers in the same country accept the same currency. Thus stable equilibria are either single currency or national currencies equilibria. I also show that currency substitution occurs as an endogenous response to high growth in the stock of a currency.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (816) 881-2254
Web page: http://www.kansascityfed.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
- Schreft, Stacey L., 1992.
"Welfare-improving credit controls,"
Journal of Monetary Economics,
Elsevier, vol. 30(1), pages 57-72, October.
- Lihong Liu & Anne Sibert, 1996.
"Government Finance with Currency Substitution,"
Archive Discussion Papers
9609, Birkbeck, Department of Economics, Mathematics & Statistics.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1984.
"Money and Interest in Cash-In-Advance Economy,"
628, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Helpman, Elhanan, 1981.
"An Exploration in the Theory of Exchange-Rate Regimes,"
Journal of Political Economy,
University of Chicago Press, vol. 89(5), pages 865-90, October.
- Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Scholarly Articles 3445091, Harvard University Department of Economics.
- Fisher, Eric O'N., 1999. "On exchange rates and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 23(5-6), pages 851-872, April.
- Ireland, Peter N, 1994. "Money and Growth: An Alternative Approach," American Economic Review, American Economic Association, vol. 84(1), pages 47-65, March.
- Soller Curtis, Elisabeth & Waller, Christopher J., 2000.
"A search-theoretic model of legal and illegal currency,"
Journal of Monetary Economics,
Elsevier, vol. 45(1), pages 155-184, February.
- Soller, E.V. & Waller, C., 1997. "A Search Theoretic Model of Legal and Illegal Currency," Papers 97-003, Indiana - Center for Econometric Model Research.
- Alan C. Stockman, 1978.
"A Theory of Exchange Rate Determination,"
UCLA Economics Working Papers
122, UCLA Department of Economics.
- Tandon, Ajay & Wang, Yong, 1999. "Inflationary Finance, Capital Controls, and Currency Substitution," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 597-612, November.
- Scott Freeman & Finn E. Kydland, 1998.
"Monetary aggregates and output,"
1998-013, Federal Reserve Bank of St. Louis.
- Ireland, Peter N., 1994. "Economic growth, financial evolution, and the long-run behavior of velocity," Journal of Economic Dynamics and Control, Elsevier, vol. 18(3-4), pages 815-848.
- Sturzenegger, Federico, 1997. "Understanding the welfare implications of currency substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 21(2-3), pages 391-416.
- Russell W. Cooper & Hubert Kempf, 2000.
"Designing Stabilization Policy in a Monetary Union,"
NBER Working Papers
7607, National Bureau of Economic Research, Inc.
- Russell Cooper & Hubert Kempf, 2000. "Designing stabilization policy in a monetary union," Working Paper 0001, Federal Reserve Bank of Cleveland.
- Russell Cooper & Hubert Kempf, 2000. "Designing Stabilization Policy in a Monetary Union," Econometric Society World Congress 2000 Contributed Papers 0529, Econometric Society.
- Russell Cooper & Hubert Kempf, 2000. "Designing Stabilization Policy in a Monetary Union," Boston University - Institute for Economic Development 99, Boston University, Institute for Economic Development.
- Akihiko Matsui, 1998.
"Strong Currency and Weak Currency,"
CIRJE-F-14, CIRJE, Faculty of Economics, University of Tokyo.
- Matsui, Akihiko, 1998. "Strong Currency and Weak Currency," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 305-333, December.
- Martin Uribe, 1995.
"Hysteresis in a simple model of currency substitution,"
International Finance Discussion Papers
509, Board of Governors of the Federal Reserve System (U.S.).
- Uribe, Martin, 1997. "Hysteresis in a simple model of currency substitution," Journal of Monetary Economics, Elsevier, vol. 40(1), pages 185-202, September.
- Zhou, Ruilin, 1997. "Currency Exchange in a Random Search Model," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 289-310, April.
- Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-20, April.
- Chang, Roberto, 1994.
"Endogenous Currency Substitution, Inflationary Finance, and Welfare,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 26(4), pages 903-16, November.
- Chang, Roberto, 1989. "Endogenous Currency Substitution, Inflationary Finance, And Welfare," Working Papers 89-12, C.V. Starr Center for Applied Economics, New York University.
- Ravikumar, B & Wallace, Neil, 2002. "A benefit of uniform currency," MPRA Paper 22951, University Library of Munich, Germany.
- Narayana Kocherlakota & Thomas Krueger, 1999. "A Signaling Model of Multiple Currencies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 231-244, January.
- Minford, Patrick, 1995. "Other people's money: Cash-in-advance microfoundations for optimal currency areas," Journal of International Money and Finance, Elsevier, vol. 14(3), pages 427-440, June.
- Kareken, John & Wallace, Neil, 1981. "On the Indeterminacy of Equilibrium Exchange Rates," The Quarterly Journal of Economics, MIT Press, vol. 96(2), pages 207-22, May.
- Boyer, Russell S. & Kingston, Geoffrey H., 1987. "Currency substitution under finance constraints," Journal of International Money and Finance, Elsevier, vol. 6(3), pages 235-250, September.
- King, Robert G. & Wallace, Neil & Weber, Warren E., 1992. "Nonfundamental uncertainty and exchange rates," Journal of International Economics, Elsevier, vol. 32(1-2), pages 83-108, February.
When requesting a correction, please mention this item's handle: RePEc:fip:fedkrw:rwp02-03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lu Dayrit)
If references are entirely missing, you can add them using this form.