A model of private bank-note issue

Ricardo Cavalcanti and Neil Wallace ()

Review of Economic Dynamics, 1999, vol. 2, issue 1, 104-136

Abstract: A random-matching model (of money) is formulated in which there is complete public knowledge of the trading histories of a subset of the population, called the banking sector, and no public knowledge of the trading histories of the complement of that subset, called the non bank sector. Each person, whether a banker or a non banker, is assumed to have the technological capability to create indivisible, distinct, and durable objects called notes. If outside money is indivisible and sufficiently scarce, then an optimal mechanism is shown to have note issue and note redemption (destruction) by members of the banking sector. (Copyright: Elsevier)

Keywords: inside money; bank notes; matching model (search for similar items in EconPapers)
JEL-codes: E40 E42 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (108)

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DOI: 10.1006/redy.1998.0044

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