Currency competition in a fundamental model of money

Gabriele Camera, Ben Craig and Christopher Waller

No 311, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: The authors study how two fiat monies, one safe and one risky, compete in a decentralized trading environment. The equilibrium value of the two currencies, their transaction velocities and agents' spending patterns are endogenously determined. The authors derive conditions under which agents holding diversified currency portfolios spend the safe currency first and hold the risky one for later purchases. They also examine when the reverse spending pattern is optimal.

Keywords: Money; Currency substitution (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-dge, nep-ifn and nep-mon
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Citations: View citations in EconPapers (2)

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Journal Article: Currency competition in a fundamental model of money (2004)
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DOI: 10.26509/frbc-wp-200311

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