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Knowledge of individual histories and optimal payment arrangements

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  • Neil Wallace

Abstract

This article reviews recent work that generalizes a random matching model of money to permit there to be a mix of transactions: some accomplished through the use of tangible media of exchange and the rest through some form of credit. The generalizations are accomplished by specifying assumptions about common knowledge of individual histories that are intermediate between no common knowledge and complete common knowledge. One of the specifications permits a simple representation of the sense in which more common knowledge is beneficial. The other permits a comparison between using outside money and using inside money as a medium of exchange.

Suggested Citation

  • Neil Wallace, 2000. "Knowledge of individual histories and optimal payment arrangements," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Sum), pages 11-21.
    • Handle: RePEc:fip:fedmqr:y:2000:i:sum:p:11-21:n:v.24no.3
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    References listed on IDEAS

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    1. Merton H. Miller & Daniel Orr, 1966. "A Model of the Demand for Money by Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(3), pages 413-435.
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    4. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "Inside and outside money as alternative media of exchange," Proceedings, Federal Reserve Bank of Cleveland, pages 443-468.
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    6. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    7. Goldman, Steven Marc, 1974. "Flexibility and the demand for money," Journal of Economic Theory, Elsevier, vol. 9(2), pages 203-222, October.
    8. Ostroy, Joseph M, 1973. "The Informational Efficiency of Monetary Exchange," American Economic Review, American Economic Association, vol. 63(4), pages 597-610, September.
    9. Mills, David C., 2007. "A Model In Which Outside And Inside Money Are Essential," Macroeconomic Dynamics, Cambridge University Press, vol. 11(3), pages 347-366, June.
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    Cited by:

    1. Ricardo Lagos, 2006. "Inside and outside money," Staff Report 374, Federal Reserve Bank of Minneapolis.
    2. Ferraris, Leo, 2010. "On the complementarity of money and credit," European Economic Review, Elsevier, vol. 54(5), pages 733-741, July.
    3. Enrique L. Kawamura, 2004. "Exchange Rate Regimes, Monetary Policy and Banking Performance in Economies with Cash Constraints. Chang and Velasco Revisited," Working Papers 66, Universidad de San Andres, Departamento de Economia, revised Jan 2004.
    4. Enrique L. Kawamura, 2003. "Diamond-Dybvig Banks in Two-Good, Two-Currencies, Small Open Economies with Cash-in-Advance Constraints," Working Papers 57, Universidad de San Andres, Departamento de Economia, revised Jan 2004.
    5. William Jack & Tavneet Suri & Robert M. Townsend, 2010. "Monetary theory and electronic money : reflections on the Kenyan experience," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 96(1Q), pages 83-122.
    6. Schulz, Christian, 2011. "Liquidity requirements and payment delays - participant type dependent preferences," Working Paper Series 1291, European Central Bank.
    7. Brand, Claus & Reimers, Hans-Eggert & Seitz, Franz, 2003. "Forecasting real GDP: what role for narrow money?," Working Paper Series 254, European Central Bank.
    8. Ed Nosal & Guillaume Rocheteau, 2006. "The economics of payments," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Feb.
    9. Kawamura, Enrique, 2007. "Exchange rate regimes, banking and the non-tradable sector," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 325-345, March.
    10. Claus Brand & Hans-Eggert Reimers & Franz Seitz, 2003. "Narrow Money and the Business Cycle: Theoretical aspects and euro area evdence," Macroeconomics 0303012, University Library of Munich, Germany.

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    Money; Credit;

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