Citation

Discussion Paper Details

Please find the details for DP8184 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Communal Responsibility and the Coexistence of Money and Credit Under Anonymous Matching

Author(s): Lars Boerner and Albrecht Ritschl

Publication Date: January 2011

Keyword(s): anonymous matching, bills of exchange, Communal responsibility and money and credit demand

Programme Area(s): International Macroeconomics

Abstract: Communal responsibility, a medieval institution studied by Greif (2006), supported the use of credit among European merchants in the absence of modern enforcement technologies. This paper shows how this mechanism helps to overcome enforcement problems in anonymous buyer/seller transactions. In a village economy version of the Lagos and Wright (2005) model, agents trading anonymously in decentralized markets can be identified by their citizenship and thus be held liable for each other. Enforceability within each village's centralized afternoon market ensures collateralization of credit in decentralized markets. In the resulting equilibrium, money and credit coexist in decentralized markets if the use of credit is costly. Our analysis easily extends itself to other payment systems like credit cards that provide a group identity to otherwise anonymous agents.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8184

Bibliographic Reference

Boerner, L and Ritschl, A. 2011. 'Communal Responsibility and the Coexistence of Money and Credit Under Anonymous Matching'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8184