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Payments network in a search model of money

  • Antoine Martin


    (Research and Statistics Federal Reserve Bank of New York)

  • Michael Orlando
  • David Skeie

In a simple search model of money, we study a special kind of memory which gives rise to an arrangement resembling a payment network. Specifically, we assume that agents can choose to have access to a central data base which keeps track of payments made and received. We show that multiple equilibria can arise because of a network effect and we study policies that can help eliminate the equilibrium with low access. We also study policies that can loosen the participation constraint. Finally, we compare our model with the model of Cavalcanti and Wallace (1999 a and b)

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 580.

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Date of creation: 03 Dec 2006
Date of revision:
Handle: RePEc:red:sed006:580
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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  1. 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.
  2. Ricardo de O. Cavalcanti & Andres Erosa, 1998. "Private Money And Reserve Management In A Random Matching Model," Macroeconomics 9802010, EconWPA.
  3. Dean Corbae & Joseph Ritter, 2004. "Decentralized credit and monetary exchange without public record keeping," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(4), pages 933-951, November.
  4. Charles M. Kahn & William Roberds, 2005. "Credit and identity theft," FRB Atlanta Working Paper 2005-19, Federal Reserve Bank of Atlanta.
  5. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
  6. Cyril Monnet & William Roberds, 2006. "Credit and the no-surcharge rule," FRB Atlanta Working Paper 2006-25, Federal Reserve Bank of Atlanta.
  7. Garcia-Swartz Daniel D. & Hahn Robert W. & Layne-Farrar Anne, 2006. "The Move Toward a Cashless Society: Calculating the Costs and Benefits," Review of Network Economics, De Gruyter, vol. 5(2), pages 1-30, June.
  8. Thorsten Koeppl & Cyril Monnet & Ted Temzelides, 2006. "A Dynamic Model of Settlement," Working Papers 1053, Queen's University, Department of Economics.
  9. Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
  10. Ping He & Lixin Huang & Randall Wright, 2005. "Money And Banking In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 637-670, 05.
  11. Weiner Stuart E. & Wright Julian, 2005. "Interchange Fees in Various Countries: Developments and Determinants," Review of Network Economics, De Gruyter, vol. 4(4), pages 1-34, December.
  12. Berentsen, Aleksander & Molico, Miguel & Wright, Randall, 2002. "Indivisibilities, Lotteries, and Monetary Exchange," MPRA Paper 68582, University Library of Munich, Germany.
  13. 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.
  14. repec:cup:macdyn:v:4:y:2000:i:3:p:289-323 is not listed on IDEAS
  15. Nobuhiro Kiyotaki & Randall Wright, 1989. "A contribution to the pure theory of money," Staff Report 123, Federal Reserve Bank of Minneapolis.
  16. Geoffrey R. Gerdes & Jack K. Walton & May X. Liu & Darrel W. Parke, 2005. "Trends in the use of payment instruments in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Spr, pages 180-201.
  17. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February.
  18. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
  19. Ed Nosal & Guillaume Rocheteau, 2006. "The economics of payments," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Feb.
  20. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
  21. Camera, Gabriele, 2000. "Money, Search, And Costly Matchmaking," Macroeconomic Dynamics, Cambridge University Press, vol. 4(03), pages 289-323, September.
  22. Geoffrey R. Gerdes & Jack K. Walton, 2002. "The use of checks and other noncash payment instruments in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Aug, pages 360-374.
  23. 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.
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