A search-theoretic model of legal and illegal currency

• 成果类型: Article
• 署名作者: Curtis, ES; Waller, CJ
• 署名单位: Drexel University; University of Kentucky
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• 发表日期: 2000
• 页码: 155-184
• 关键词: money; search; currency restrictions

摘要

Using a search-theoretic model of money, we explore the conditions under which two currencies, domestic and foreign, will co-exist despite legal restrictions on the use of foreign currency for internal trade. We study how changes in government policy (i.e., its enforcement of currency laws through fines ol the rate of enforcement) affects the acceptability of illegal currency, the equilibrium value of both currencies and the implicit exchange rate. First we construct a model with indivisible goods to show conditions under which legal currency is fully acceptable but illegal currency circulates with varying acceptability. We then introduce bargaining to determine prices in legal and illegal currency. We show that some enforcement polices can create multiple equilibria while others will not. Also, some methods of enforcement are capable of driving the illegal currency out of circulation while others are not. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: E40; E42.