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Journal Article

Dual-currency economies as multiple-payment systems


Abstract: Monetary search models are valuable for studying how a second currency's acceptability arises endogenously in an economy that lacks a stable domestic currency and other more sophisticated payment systems. Search models' basic assumptions (absence of credit, lack of smoothly functioning banking systems, reliance on currency as the sole medium of exchange, and primitive trading environments) are not necessarily consistent with modern financial systems. They do, however, provide good descriptions of transitional and developing economies, particularly in the countries of the former Soviet Union, and may yield helpful policy prescriptions.

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Review

Publication Date: 2000

Issue: Q I

Pages: 2-13