The Signaling Role of Municipal Currencies in Local Development

36 Pages Posted: 18 Apr 2003

See all articles by Rajshri Jayaraman

Rajshri Jayaraman

University of Munich and CESifo

Mandar P. OAK

Williams College - Department of Economics

Date Written: April 2003

Abstract

The last decade has seen the burgeoning of several hundred local community currency institutions in cities across the world. Although residents of these communities claim that local currency promotes local development, how if at all it does so has hitherto been unexplored. This paper argues that the introduction of a municipal currency may serve as a signal of demand for local goods. Where demand uncertainty deters firms from investing in more productive technologies, such a signal improves the chances that technology choice will be optimal. The introduction of a local currency therefore always improves ex-ante efficiency and may lead to ex-post efficiency, with strictly higher levels of productivity and welfare.

JEL Classification: D8, O12, E4

Suggested Citation

Jayaraman, Rajshri and Oak, Mandar P., The Signaling Role of Municipal Currencies in Local Development (April 2003). Available at SSRN: https://ssrn.com/abstract=396325

Rajshri Jayaraman (Contact Author)

University of Munich and CESifo ( email )

Schackstr. 4
Munich, 80539
Germany

HOME PAGE: http://www.lrz-muenchen.de/~ces/raji.htm

Mandar P. Oak

Williams College - Department of Economics ( email )

Fernald House
Williamstown, MA 01267
United States
413-597-2300 (Phone)
413-597-4045 (Fax)

HOME PAGE: http://www.williams.edu/Economics/oak/cv.htm

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
66
Abstract Views
828
rank
398,640
PlumX Metrics