IDEAS home Printed from
   My bibliography  Save this paper

Monetary Policy in Private Money Economies


  • Christopher Waller

    (University of Notre Dame)

  • Aleksander Berentsen

    (University of Basel)

  • David Andolfatto

    (Federal Reserve Bank of St. Louis)


We develop a variant of the Lagos and Wright (2005) model to study the role of real assets as media of exchange (private money). There is productive capital in the model that is controlled by an asset fund that finances itself by issuing claims against the capital stock. Although the claims are freely traded in a competitive secondary market, asset fund manager controls 1) the number of claims outstanding, 2) the dividends paid out to claim holders and 3) the fee charged for participating in the asset fund. Our main results are as follows. The first-best allocation can always be replicated by the fund manager. Doing so requires that the private money supply grows in equilibrium and the fee must be positive. In this case, introducing fiat money does not improve the allocation hence it is not essential. We show that the fee charged by the asset fund plays the same role as lump-sum taxation by a government running the Friedman rule. However, if the fee is constrained to be zero, then the first best allocation cannot be obtained while the second best policy still requires a positive growth rate in the number of claims. In this case, a fiat object controlled by the government may be essential.

Suggested Citation

  • Christopher Waller & Aleksander Berentsen & David Andolfatto, 2013. "Monetary Policy in Private Money Economies," 2013 Meeting Papers 1060, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:1060

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed013:1060. 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: (Christian Zimmermann). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.