Creator: Wallace, Neil and Zhou, Ruilin Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 569 Abstract:
Until the mid-19th century, shortages of currency were sometimes serious problems. One common response was to prohibit the export of coins. We use a random matching model with indivisible money to explain a shortage and to judge the desirability of a prohibition on the export of coins. The model, although extreme in many regards, represents better than earlier models a demand for outside money and the problems that arise when that money is indivisible. It can also rationalize a prohibition on the export of coins.
Keyword: Indivisible money, Export of coins, and Currency shortage Subject (JEL): N10 - Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative, E40 - Money and Interest Rates: General, and E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems