A Search Theoretic Model of Legal and Illegal Currency

E.V. Soller and Christopher Waller

Working Papers from Indiana - Center for Econometric Model Research

Abstract: Using a search theoretic model of money, we explore the conditions under which two currencies, domestic and foreign, will co-exist depsite legal restrictions on the use of foreign currency for internal trade. We then study how changes in government policy regarding enforcement of currency laws affects the equilibrium value of both currencies, the exchange rate and goverment seigniorage revenues. In our one country, two currency model, we show that there are multiple monetary equilibria.

Keywords: CURRENCIES; EXCHANGE RATE; MODELS (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Pages: 36 pages
Date: 1997
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Citations: View citations in EconPapers (6)

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Journal Article: A search-theoretic model of legal and illegal currency (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:indian:97-003

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