Counterfeiting as Private Money in Mechanism Design

31 Pages Posted: 23 Jul 2008

See all articles by Ricardo Cavalcanti

Ricardo Cavalcanti

affiliation not provided to SSRN

Ed Nosal

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Date Written: November 2007

Abstract

We describe counterfeiting activity as the issuance of private money, one which is difficult to monitor. Our approach, which amends the basic random-matching model of money in mechanism design, allows a tractable welfare analysis of currency competition. We show that it is not efficient to eliminate counterfeiting activity completely. We do not appeal to lottery devices, and we argue that this is consistent with imperfect monitoring.

Keywords: counterfeiting, private money, imperfect monitoring, mechanism design

JEL Classification: E4, E5

Suggested Citation

Cavalcanti, Ricardo and Nosal, Ed, Counterfeiting as Private Money in Mechanism Design (November 2007). FRB of Cleveland Working Paper No. 07-16. Available at SSRN: https://ssrn.com/abstract=1169872 or http://dx.doi.org/10.2139/ssrn.1169872

Ricardo Cavalcanti

affiliation not provided to SSRN

Ed Nosal (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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