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Discussion Paper Details

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Title: Inside-Outside Money Competition

Author(s): Ramon Marimon, Juan Pablo Nicolini and Pedro Teles

Publication Date: September 2003

Keyword(s): currency competition, electronic money, inflation, inside money and reputation

Programme Area(s): International Macroeconomics

Abstract: We study how competition from privately-supplied currency substitutes affects monetary equilibria. Whenever currency is inefficiently provided, inside money competition plays a disciplinary role by providing an upper bound on equilibrium inflation rates. Furthermore, if ?inside monies? can be produced at a sufficiently low cost, outside money is driven out of circulation. Whenever a ?benevolent? government can commit to its fiscal policy, sequential monetary policy is efficient and inside money competition plays no role.

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Bibliographic Reference

Marimon, R, Nicolini, J and Teles, P. 2003. 'Inside-Outside Money Competition'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4039