Working Paper

A model of a currency shortage

Abstract: Until the mid-19th century, shortages of currency were sometimes serious problems. One common response was to prohibit the export of coins. We use a random matching model with indivisible money to explain a shortage and to judge the desirability of a prohibition on the export of coins. The model, although extreme in many regards, represents better than earlier models a demand for outside money and the problems that arise when that money is indivisible. It can also rationalize a prohibition on the export of coins.

Keywords: Money supply;

Status: Published in Journal of Monetary Economics (Vol. 40, No. 3, December 1997, pp. 555-572)

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Working Papers

Publication Date: 1996

Number: 569