Inside and Outside Money as Alternative Media of Exchange

Ricardo De O. Cavalcanti, Neil Wallace

Research output: Contribution to journalArticlepeer-review

101 Scopus citations


We study a random-matching model of money in which a subset of people, called bankers, have known histories and the rest, called nonbankers, have unknown histories. Earlier, we showed that if there are no outside assets, then an optimal arrangement has bankers issuing objects, banknotes, that are used in trades involving nonbankers. Here, the same model is used to compare such exclusive use of inside money to the exclusive use of outside money. We show that the set of implementable outcomes using outside money is a strict subset of the set using inside money.

Original languageEnglish (US)
Pages (from-to)432-457
Number of pages26
JournalJournal of Money, Credit and Banking
Issue number3
StatePublished - Aug 1999

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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