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Discussion Paper
Estimating the volume of counterfeit U.S. currency in circulation worldwide: data and extrapolation
The incidence of currency counterfeiting and the possible total stock of counterfeits in circulation are popular topics of speculation and discussion in the press and are of substantial practical interest to the U.S. Treasury and the U.S. Secret Service. This paper assembles data from Federal Reserve and U.S. Secret Service sources and presents a range of estimates for the number of counterfeits in circulation. In addition, the paper presents figures on counterfeit passing activity by denomination, location, and method of production. The paper has two main conclusions: first, the stock of ...
Discussion Paper
Controlling risk in a lightning-speed trading environment
A small group of high-frequency algorithmic trading firms have invested heavily in technology to leverage the nexus of high-speed communications, mathematical advances, trading and high-speed computing. By doing so, they are able to complete trades at lightning speeds. High-frequency algorithmic trading strategies rely on computerized quantitative models that identify which type of financial instruments to buy or sell (e.g., stocks, options or futures), as well as the quantity, price, timing and location of the trades. These so-called black boxes are capable of reading market data, ...
Working Paper
Will the new $100 bill decrease counterfeiting?
A current U.S. policy is to introduce a new style of currency that is harder to counterfeit, but not immediately to withdraw from circulation all of the old-style currency. This policy is analyzed in a random-matching model of money, and its potential to decrease counterfeiting in the long run is shown. For various parameters of the model, three types of equilibria are found to occur. In only one does counterfeiting continue at its initial high level. In the other two, both genuine and counterfeit old-style money go out of circulation - immediately in one and gradually in the other. There are ...
Journal Article
Making money keeps getting easier
Working Paper
Estimating the worldwide volume of counterfeit U.S. currency: data and extrapolation
The incidence of currency counterfeiting and the possible total stock of counterfeits in circulation are popular topics of speculation and discussion in the press and are of substantial practical interest to the U.S. Treasury and the U.S. Secret Service. This paper assembles data from Federal Reserve and U.S. Secret Service sources and presents a range of estimates for the number of counterfeits in circulation. In addition, the paper presents figures on counterfeit passing activity by denomination, location, and method of production. The paper has two main conclusions: first, the stock of ...
Working Paper
Information and liquidity: a discussion
I extend and discuss the model of asset liquidity by Lester, Postlewaite, and Wright (2007, 2008). I consider a model with decentralized trades in which claims on a real and divisible asset serve as means of payment. A recognizability problem is introduced by assuming that the claims on the asset can be counterfeited at a positive cost. This formalization nests the models by Lagos and Rocheteau (2008) and Geromichalos, Licari, and Suarez-Lledo (2007) in which there is no recognizability problem, and Lester, Postlewaite, and Wright (2007), in which counterfeits can be produced at no cost. Even ...
Working Paper
On the threat of counterfeiting
We study counterfeiting of currency in a search?theoretic model of monetary exchange. In contrast to Nosal and Wallace (2007), we establish that counterfeiting does not pose a threat to the existence of a monetary equilibrium; i.e., a monetary equilibrium exists irrespective of the cost of producing counterfeits, or the ease with which genuine money can be authenticated. However, the possibility to counterfeit ?at money can affect its value, velocity, output and welfare, even if no counterfeiting occurs in equilibrium. We provide two extensions of the model under which the threat of ...
Working Paper
Comment on Cavalcanti and Nosal's \"Counterfeiting as private money in mechanism design\"
In this comment, the author extends Cavalcanti and Nosal's (2010) framework to include the case of perfectly divisible money and unrestricted money holdings. He shows that when trade takes place in Walrasian markets, counterfeits circulate and the Friedman rule is still optimal.
Working Paper
A model of (the threat of) counterfeiting
A simple matching-model of money with the potential for counterfeiting is constructed. In contrast to the existing literature, counterfeiting, if it occurred, would be accompanied by two distortions: costly production of counterfeits and harmful effects on trade. However, application of the Cho-Kreps refinement is shown to imply that there is no equilibrium with counterfeiting. If the cost of producing counterfeits is low enough, then there is no monetary equilibrium. Otherwise, there is a monetary equilibrium without counterfeiting.
Journal Article
Economic history: The counterfeiting weapon: Attacks against American currency began in 1776
Related links: https://www.richmondfed.org/-/media/richmondfedorg/publications/research/econ_focus/2012/q1/economic_history_weblinks.cfm