Paper # Author Title
We study the circumstances under which commodities emerge endogenously as media of exchange - the way cigarettes apparently did, for example, in POW camps - both when there is fiat money available and when there is not. We characterize how specialization, the degree of trading frictions, intrinsic properties of commodities, and the amount of fiat money available determine whether a commodity serves as money and its exchange value. In some equilibria, the exchange value of commodity money is pinned down by its consumption value; in others, it is not. The value of fiat money mayor may not be pinned down by that of commodity money, depending on circumstances. We also allow commodities to come in heterogeneous qualities and discuss the implications for Gresham's Law. Download Paper
We generalize the two-country, two-currency, search-based monetary model of Matsuyama, Kiyotaki and Matsui to resolve two "short-comings" in their approach. First, we endogenize prices and exchange rates.  Second, we discuss some policy considerations. We use the model to address several questions related to the determination of the realms of circulation and relative values of different monies.  Download Paper