Sébastien Lotz

The Coexistence of Commodity Money and Fiat Money

In reaction to the monetary turmoil created by the financial crisis of September 2008, both legislative and constitutional reforms have been proposed in different Countries to introduce Commodity Money alongside existing National Fiat Currency. A thorough evaluation of the Economic consequences of these new proposals is warranted. This paper surveys some of the existing knowledge in Monetary and Financial Economics for the purpose of answering the significant Economic questions raised by these new political initiatives.

A NEW MONETARIST MODEL OF FIAT AND E-MONEY: FIAT AND E-MONEY

We develop a dual payment New Monetarist model, where an electronic money (e‐purse) competes with fiat money (cash). The two payment instruments differ in terms of security, cost, and acceptability. Strategic complementarities lead to multiple monetary equilibria. We establish the conditions under which e‐money can coexist with, or replace fiat money, and explain the reasons for the e‐purse failure/success in a few countries. We also compare welfare when one currency or both circulate. When the risk of theft of cash is endogenous, e‐money cannot replace cash entirely; however, low inflation can facilitate the adoption of e‐money in parallel with fiat money. (JEL D83, E40, E50)

Intensive vs Extensive Margin Tradeoffs in a Simple Monetary Search Model

We introduce ex-post heterogeneity into monetary search models with lotteries. Heterogeneity allows lotteries over goods to exist in equilibrium. These lotteries over goods create an intensive margin (expected production in a match) that is non-existent in all indivisible goods monetary search models. We then show there can be a tradeoff between the intensive margin and extensive margin (number of matches) when choosing the optimal monetary stock.