PRIVATE VERSUS PUBLIC MONEY

Cyril Monnet

International Economic Review, 2006, vol. 47, issue 3, 951-960

Abstract: I show that the nature of agents' production determines whether they should issue money. I use a matching model with no commitment and no enforcement. Some agents can produce goods, whereas others are unproductive. All agents can produce at a cost a distinguishable, intrinsically useless but durable good: notes. Productive agents produce red notes whereas unproductive agents produce green notes. I find that green notes are the most efficient means of exchange, as they implement more allocations than red notes and at a lower cost. Therefore, unproductive agents should issue money. I associate unproductive agents to agents producing public goods. Copyright 2006 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Date: 2006
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