The Two Gresham’s Laws: Parallel Currencies in a Small Country

Pedro Schwartz ()
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Pedro Schwartz: Universidad Camilo José Cela

A chapter in The Emergence of a Tradition: Essays in Honor of Jesús Huerta de Soto, Volume I, 2023, pp 307-318 from Springer

Abstract: Abstract In this work I study the stability conditions of a monetary system with two currencies, one official money issued by the central bank and a second initiated or chosen by the general public. Such a two-money system can be useful in developing countries or in more developed countries aspiring to join a monetary union. This goes directly against the belief that monetary authorities can trick people into thinking that their income grows when it is nominally multiplied by inflation rather than by increased productivity. To support such a contrarian attitude, I analyze the experience of Kenya with the private currency called M-Pesa, in wide use in East Africa and surrounding countries.

Keywords: Monetary competition; Parallel currencies; Flexible and fixed exchange rates; Dollarization; Central bank objectives; Legal tender; Seigniorage; Money supply control (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-17414-8_24

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DOI: 10.1007/978-3-031-17414-8_24

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