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On the Local Interaction of Money and Credit

  • Jin, Yi

    ()

    (University of Iowa)

  • Temzelides, Ted

    ()

    (University of Iowa)

We study the emergence and coexistence of monetary and credit transactions in a model where exchange is decentralized. Agents belong to different villages which are informationally separated. The frequency of meetings between any two different villages decreases as their respective geographic distance from one another increases. The equilibrium mix of monetary and credit transactions is characterized as a function of the frequency of meetings among agents from different villages. Our economy may be interpreted as a medieval economy. Trade takes place only amoung a small set of nearby villages via the use of credit. Monetary trades emerge only after interactions with faraway villages become sufficiently frequent. Even in that case, trades among nearby villages remain non-monetized.

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File URL: http://www.biz.uiowa.edu/Faculty/ttemzelides/yi.PDF
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Paper provided by University of Iowa, Department of Economics in its series Working Papers with number 99-05.

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Length: 22 pages
Date of creation: Oct 1998
Date of revision:
Handle: RePEc:uia:iowaec:99-05
Contact details of provider: Postal: University of Iowa, Department of Economics, Henry B. Tippie College of Business, Iowa City, Iowa 52242
Phone: (319) 335-0829
Fax: (319) 335-1956
Web page: http://tippie.uiowa.edu/economics/

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  16. Glen Ellison, 2010. "Learning, Local Interaction, and Coordination," Levine's Working Paper Archive 391, David K. Levine.
  17. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
  18. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
  19. Marimon, Ramon & McGrattan, Ellen & Sargent, Thomas J., 1990. "Money as a medium of exchange in an economy with artificially intelligent agents," Journal of Economic Dynamics and Control, Elsevier, vol. 14(2), pages 329-373, May.
  20. Camera, G. & Corbae, D., 1998. "Money and Price Dispersion," Working Papers 98-03, University of Iowa, Department of Economics.
  21. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
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