Inside Outside Money Competition

Juan Pablo Nicolini, Ramon Marimon and Pedro Teles

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: We study how competition from privately supplied currency substitutes a¤ects monetary policy. We focus on regimes where monetary policy must be sequentially optimal. We obtain that the workings of competition between currency and currency substitutes depend critically on government objectives. However, the impact inside money competition has on equilibrium outcomes does not. In fact, we show that, in general, it enhances e¢ciency and reduces equilibrium in‡ation rates. Nevertheless, if the supply of “inside monies” is very e¢cient, then the equilibrium with currency may not be sustainable and only “inside money” will be held in equilibrium.

Pages: 27 pages
Date: 2001-03
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Related works:
Journal Article: Inside-outside money competition (2003)
Working Paper: Inside-Outside Money Competition (2003)
Working Paper: Inside-outside money competition (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:004

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