Commodity Money in a Convex Trading Post Sequence Economy

Ross M. Starr

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: General equilibrium is investigated with N commodities deliverable at T dates traded spot and futures at ½ N 2T 3 dated commodity-pairwise trading posts. Trade is a resource-using activity recovering transaction costs through the spread between (bid) wholesale) and ask (retail) prices (pairwise rates of exchange). Budget constraints are enforced at each trading post separately implying demand for a carrier of value between trading posts and over time, commodity money (spot or futures). Trade in media of exchange and stores of value is the difference between gross and net inter-post trades. “Demand for ‘money’” is stocks held for retrade.

Keywords: Equilibrium; Money and Interest Rates (search for similar items in EconPapers)
Date: 2008-08-19
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