Time-Consistent Private Supplie of Outside Paper Money

Aleksander Berentsen

No 156, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: This paper considers a monopolist�s supply of outside paper money in a random-matching model with divisible money and divisible goods. When binding supply announcements are feasible, the revenue-maximizing policy is characterized by an initial period where the monopolist initiates a currency reform which destroys the value of any old currency, and then issues new money, which the issuer taxes thereafter with a constant gross growth rate of money. It is shown that this policy is time-consistent if the trading history of the issuer is public information and if money demanders respond to the relevation of defection by playing autarky.

Keywords: Outside Money; Time Consistency; Private Money; Search Equilibrium (search for similar items in EconPapers)
JEL-codes: D83 E00 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.zora.uzh.ch/id/eprint/52054/1/iewwp156.pdf (application/pdf)

Related works:
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:zur:iewwpx:156

Access Statistics for this paper

More papers in IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich
Bibliographic data for series maintained by Severin Oswald (severin.oswald@ub.uzh.ch).