Limited participation, private money, and credit in a spatial model of money

Stephen Williamson

A chapter in Recent Developments on Money and Finance, 2006, pp 255-273 from Springer

Abstract: Summary The purpose of this paper is to explore the implications of private money issue for the effects of monetary policy, for optimal policy, and for the role of fiat money. A locational model is constructed which gives an explicit account of the role for money and credit, and for limited financial market participation. When private money issue is prohibited, there is a liquidity effect as the result of a money injection from the central bank, but this effect goes away when private money is permitted. Private money issue changes dramatically the nature of optimal monetary policy. With private money, fiat currency is no longer used in transactions involving goods, but currency and central bank reserves play an important part in the clearing and settlement of private money returned for redemption.

Keywords: Monetary Policy; Competitive Equilibrium; Nominal Interest Rate; Money Growth; Liquidity Effect (search for similar items in EconPapers)
Date: 2006
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Journal Article: Limited participation, private money, and credit in a spatial model of money (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:steccp:978-3-540-29500-6_13

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DOI: 10.1007/3-540-29500-3_13

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