Modeling denomination structures

Manjong Lee, Neil Wallace, Tao Zhu

Research output: Contribution to journalArticle

25 Citations (Scopus)

Abstract

Previous work on the denomination structure of currency treats as exogenous the distribution of transactions and the denominations held by people. Here, by way of a matching model, both are endogenous. In the model, trades in pairwise meetings alternate in time with the opportunity to freely choose a portfolio of denominations and there is a trade-off between the benefits of small-denomination money for transacting and the costliness of carrying a large quantity of small-denomination money. For a given denomination structure, a monetary steady state is shown to exist. The model implies that too small denominations are abandoned.

Original languageEnglish
Pages (from-to)949-960
Number of pages12
JournalEconometrica
Volume73
Issue number3
DOIs
Publication statusPublished - 2005 May 1

Fingerprint

denomination
Model Matching
Currency
Modeling
Alternate
Transactions
Pairwise
Choose
Trade-offs
Imply
Model
money
Money
Denomination
currency
transaction
Trade

Keywords

  • Currency
  • Denominations
  • Matching model

ASJC Scopus subject areas

  • Mathematics (miscellaneous)
  • Statistics and Probability
  • Economics and Econometrics
  • Social Sciences (miscellaneous)

Cite this

Modeling denomination structures. / Lee, Manjong; Wallace, Neil; Zhu, Tao.

In: Econometrica, Vol. 73, No. 3, 01.05.2005, p. 949-960.

Research output: Contribution to journalArticle

Lee, Manjong ; Wallace, Neil ; Zhu, Tao. / Modeling denomination structures. In: Econometrica. 2005 ; Vol. 73, No. 3. pp. 949-960.
@article{4474a5b788c04e06bfa8f49b66441d0c,
title = "Modeling denomination structures",
abstract = "Previous work on the denomination structure of currency treats as exogenous the distribution of transactions and the denominations held by people. Here, by way of a matching model, both are endogenous. In the model, trades in pairwise meetings alternate in time with the opportunity to freely choose a portfolio of denominations and there is a trade-off between the benefits of small-denomination money for transacting and the costliness of carrying a large quantity of small-denomination money. For a given denomination structure, a monetary steady state is shown to exist. The model implies that too small denominations are abandoned.",
keywords = "Currency, Denominations, Matching model",
author = "Manjong Lee and Neil Wallace and Tao Zhu",
year = "2005",
month = "5",
day = "1",
doi = "10.1111/j.1468-0262.2005.00599.x",
language = "English",
volume = "73",
pages = "949--960",
journal = "Econometrica",
issn = "0012-9682",
publisher = "Wiley-Blackwell",
number = "3",

}

TY - JOUR

T1 - Modeling denomination structures

AU - Lee, Manjong

AU - Wallace, Neil

AU - Zhu, Tao

PY - 2005/5/1

Y1 - 2005/5/1

N2 - Previous work on the denomination structure of currency treats as exogenous the distribution of transactions and the denominations held by people. Here, by way of a matching model, both are endogenous. In the model, trades in pairwise meetings alternate in time with the opportunity to freely choose a portfolio of denominations and there is a trade-off between the benefits of small-denomination money for transacting and the costliness of carrying a large quantity of small-denomination money. For a given denomination structure, a monetary steady state is shown to exist. The model implies that too small denominations are abandoned.

AB - Previous work on the denomination structure of currency treats as exogenous the distribution of transactions and the denominations held by people. Here, by way of a matching model, both are endogenous. In the model, trades in pairwise meetings alternate in time with the opportunity to freely choose a portfolio of denominations and there is a trade-off between the benefits of small-denomination money for transacting and the costliness of carrying a large quantity of small-denomination money. For a given denomination structure, a monetary steady state is shown to exist. The model implies that too small denominations are abandoned.

KW - Currency

KW - Denominations

KW - Matching model

UR - http://www.scopus.com/inward/record.url?scp=27744510991&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=27744510991&partnerID=8YFLogxK

U2 - 10.1111/j.1468-0262.2005.00599.x

DO - 10.1111/j.1468-0262.2005.00599.x

M3 - Article

VL - 73

SP - 949

EP - 960

JO - Econometrica

JF - Econometrica

SN - 0012-9682

IS - 3

ER -