Making Money

Gary Gorton, Chase Ross and Sharon Y. Ross

No 29710, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: It is difficult for private agents to produce money that circulates at par with no questions asked. We study two cases of privately-produced money: pre-Civil War U.S. private banknotes and modern stablecoins. Private monies are introduced when there are no better alternatives, but they initially carry an inconvenience yield. Over time, these monies may become more money-like, but they do not always achieve a positive convenience yield. Technology advances and reputation formation pushed private banknotes toward a positive convenience yield. We show that the same forces are at work for stablecoins.

JEL-codes: E02 E4 E41 E42 E51 G1 G21 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-his, nep-mac, nep-mon and nep-pay
Note: AP CF ME PR
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