Until the mid-19th century, shortages of currency were common. Moreover, a frequent policy response was a prohibition on 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 money.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics