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The Appearance of Carriers and the Origins of Money

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  • Jose Noguera S.

    (CERGE-EI)

Abstract

The main goal of this essay is to provide microfoundations in a spatial general equilibrium framework for the fact that individuals use money to make transactions, and hence microfoundations for the cash in advance constraint. We analyze the emergence of a monetary economy out of a redistribution barter system where goods are sent to a central market and then redistributed among individuals. We show that, as the population increases beyond a certain point, the barter exchange system becomes too expensive. To reduce the exchange system cost, and as a result of individuals’ rational behavior, a new specialized merchant, the carrier, appears and causes frictions among traders leading to the appearance of money. There are, however, certain conditions for this process to succeed. These conditions concern the economic characteristics of those goods chosen to act as money, and the level of economic development.

Suggested Citation

  • Jose Noguera S., 2001. "The Appearance of Carriers and the Origins of Money," Macroeconomics 0012014, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpma:0012014
    Note: Type of Document - Acrobat PDF; pages: 36 ; figures: included
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    References listed on IDEAS

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    More about this item

    Keywords

    Barter; Money; Carrier; Market center; City; Transaction cost;

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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