Private Electronic Money, Fiat Money and the Payments System

Paula Hernandez-Verme (), Haibo Huang () and Andrew B. Whinston ()
Additional contact information
Paula Hernandez-Verme: Department of Economics and Finance, Universidad de Guanajuato
Andrew B. Whinston: Center for Research in Electronic Commerce Department of Management and Information Systems, University of Texas at Austin

No EC200902, Department of Economics and Finance Working Papers from Universidad de Guanajuato, Department of Economics and Finance

Abstract: This paper provides insight on how a modern system of private electronic money would work and how the necessary network shall function. We present a model with two types of private electronic currencies with one being local, and the other being global. Both of them display transactional advantages and dominate fiat money in rate of return. However, in spite of these different returns, the two electronic currencies and fiat money circulate in equilibrium. We further observe that the local electronic currency can be sold with a premium or with a discount, depending on several factors including the probability of relocation faced by the agents in this economy. The higher the probability of relocation, the higher is this discount, and the lower the share of the local electronic currency in the young creditors’ portfolio.

Keywords: Private Money; Commodity Money; Network; Payments System; Competition (search for similar items in EconPapers)
JEL-codes: E41 E52 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-07
References: Add references at CitEc
Citations:

Downloads: (external link)
http://economia.ugto.org/WorkingPapers/EC200902.pdf (application/pdf)

Related works:
Working Paper: Private Electronic Money, Fiat Money and the Payments System (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gua:wpaper:ec200902

Access Statistics for this paper

More papers in Department of Economics and Finance Working Papers from Universidad de Guanajuato, Department of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Luis Sanchez Mier ( this e-mail address is bad, please contact ).