The Appearance of Carriers and the Origins of Money

Jose Noguera

Macroeconomics from University Library of Munich, Germany

Abstract: The main goal of this essay is to provide microfoundations in a spatial general equilibrium framework for the fact that individuals use money to make transactions, and hence microfoundations for the cash in advance constraint. We analyze the emergence of a monetary economy out of a redistribution barter system where goods are sent to a central market and then redistributed among individuals. We show that, as the population increases beyond a certain point, the barter exchange system becomes too expensive. To reduce the exchange system cost, and as a result of individuals’ rational behavior, a new specialized merchant, the carrier, appears and causes frictions among traders leading to the appearance of money. There are, however, certain conditions for this process to succeed. These conditions concern the economic characteristics of those goods chosen to act as money, and the level of economic development.

Keywords: Barter; Money; Carrier; Market center; City; Transaction cost (search for similar items in EconPapers)
JEL-codes: E40 E41 N10 R10 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2001-02-12
New Economics Papers: this item is included in nep-mon
Note: Type of Document - Acrobat PDF; pages: 36 ; figures: included
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Working Paper: The Appearance of Carriers and the Origins of Money (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0012014

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