Is a Secondary Currency Essential? – On the Welfare Effects of a New Currency-Reference-Cited by-同舟云学术

Is a Secondary Currency Essential? – On the Welfare Effects of a New Currency

Published:2023-04-01 Issue:2 Volume:243 Page:153-167
ISSN:0021-4027
Container-title:Jahrbücher für Nationalökonomie und Statistik
language:en
Short-container-title:

Author:

Fuchs Max¹,Michaelis Jochen²

Affiliation:

1. Research assistant, Department of Economics , University of Kassel , Nora-Platiel-Straße 4, 34127 Kassel , Germany

2. Professor, Department of Economics , University of Kassel , Nora-Platiel-Straße 4, 34127 Kassel , Germany

Abstract

Abstract The coexistence of fiat money (cash) and digital monies constitutes a system of parallel currencies as media of exchange. This paper asks whether a new (digital) currency is essential: Does a new currency allow for a better resource allocation even if a fully accepted currency is in circulation and remains in circulation? Using the dual currency search model of Kiyotaki and Wright (1993. A search-theoretic approach to monetary economics. Am. Econ. Rev. 83: 63–77), we show how the introduction of a secondary currency affects average utility. There is some scope for a welfare improvement as the welfare effect depends on differences in returns and costs, and, in particular, on the proportion of cash traders who will be replaced by digital money traders.

Funder

Universitӓt Kassel

Publisher

Walter de Gruyter GmbH

Subject

Economics and Econometrics,Social Sciences (miscellaneous),General Business, Management and Accounting

Link

https://www.degruyter.com/document/doi/10.1515/jbnst-2022-0054/pdf

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