Dirty Money

38 Pages Posted: 21 Dec 2014

See all articles by Gabriele Camera

Gabriele Camera

Chapman University - Economic Science Institute; University of Bologna - Dept. of Economics

Date Written: 2001

Abstract

An inter-governmental body is encouraging the replacement of currency with the objective of discouraging illegal economic activities. This policy is analyzed in a search-theoretic model where individuals choose legal or illegal production, settle trades via monetary or costly intermediated exchange, and where the government imperfectly monitors monetary transactions. Stationary monetary equilibria with both legal and illegal production exist, in which case the over-provision of currency may increment the extent of illegal production. This result holds also in the presence of intermediated exchange of legal goods. Equilibria with differing transaction patterns and degrees of illicit activities coexist.

Keywords: Search, Money, Illegal Activities, Underground Economy

JEL Classification: C78; D83; E40

Suggested Citation

Camera, Gabriele, Dirty Money (2001). Journal of Monetary Economics, Vol. 47, No. 2, 2001. Available at SSRN: https://ssrn.com/abstract=2540717

Gabriele Camera (Contact Author)

Chapman University - Economic Science Institute ( email )

Orange, CA 92866
United States

HOME PAGE: http://www1.chapman.edu/~camera/

University of Bologna - Dept. of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

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