A model of regulated private bank-note issue

Ricardo Cavalcanti and Neil Wallace ()

No 581, Working Papers from Federal Reserve Bank of Minneapolis

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 banks, and no public knowledge of the trading histories of the complement of that subset, called nonbanks. 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 destruction (redemption) by banks.

Keywords: Bank; notes (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:581

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