Real Effects of Supplying Safe Private Money

Chenzi Xu and He Yang

No 30060, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Privately issued money often bears devaluation risk that create monetary transaction frictions. We evaluate the real effects of supplying a new type of safe money in the historical context of the US in 1863. We instrument for the change in monetary frictions locally using regulatory capital requirements and measure the degree safe money access with a market access approach derived from general equilibrium trade theory. Lowering monetary transaction costs increased traded goods production and spurred structural transformation with more manufacturing output, employment, and urban population. The growth in manufacturing was driven by employment and inputs rather than capital investment.

JEL-codes: E42 E44 E51 F14 G21 N11 N21 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-his, nep-mac, nep-mon and nep-pay
Note: CF DAE ITI ME
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Published as Chenzi Xu & He Yang, 2024. "Real effects of supplying safe private money," Journal of Financial Economics, vol 157.

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