Search Results
Journal Article
Explaining the demand for free bank notes
Discussion Paper
Private money and reserve management in a random-matching model
In this paper, we develop a model of money and reserve-holding banks. We allow for private liabilities to circulate as media of exchange in a random-matching framework. Some individuals, which we identify as banks, are endowed with a technology to issue private notes and to keep reserves with a clearinghouse. Bank liabilities are redeemed according to a stochastic process that depends on the endogenous trades. We find conditions under which note redemptions act as a force that is sufficient to stabilize note issue by the banking sector.
Journal Article
The Suffolk Bank and the Panic of 1837
The Suffolk Bank in Boston is well known as having been the clearinghouse for virtually all the banknotes that circulated in New England between 1836 and 1858. An examination of 19th century bank balance sheets shows that during and after the U.S. banking Panic of 1837, this private commercial bank also provided some services that today are provided by central banks. These include lending reserves to other banks (providing a discount window) and keeping the payments system operating. Because of Suffolk's activities, banks in New England fared better than banks elsewhere during the Panic of ...
Working Paper
Government and private e-money-like systems: federal reserve notes and national bank notes
The period from 1914 to 1935 in the United States is unique in that it was the only time that both privately issued bank notes (national bank notes) and central-bank-issued bank notes (Federal Reserve notes) were simultaneously in circulation. This paper describes some lessons relevant to e-money from the U.S. experience during this period. It argues that Federal Reserve notes were not issued to be a superior currency to national bank notes. Rather, they were issued to enable the Federal Reserve System to act as a lender of last resort in times of financial stress. It also argues that the ...
Journal Article
New $10 note to debut in early 2006
Working Paper
European hoarding: currency use among immigrants in Switzerland
Do immigrants have a higher demand for large denominated banknotes than natives? This study examines whether cash orders for CHF 1000 notes, a banknote not used for daily transactions, is concentrated in Swiss cities with a high foreign-to-native ratio. Controlling for a range of socio-economic indicators across 250 Swiss cities, European immigrants in Switzerland are found to hoard less CHF 1000 banknotes than natives. A 1 percent increase in the immigrant-to-native ratio leads to a reduction in currency orders by CHF 4000. This negative correlation between immigrant-to-native ratio and ...
Working Paper
A model of banknote discounts
Prior to 1863, state-chartered banks in the United States issued notes - dollar-denominated promises to pay specie to the bearer on demand. Although these notes circulated at par locally, they usually were quoted at a discount outside the local area. These discounts varied by both the location of the bank and the location where the discount was being quoted. Further, these discounts were asymmetric across locations, meaning that the discounts quoted in location A on the notes of banks in location B generally differed from the discounts quoted in location B on the notes of banks in location A. ...
Conference Paper
Private money creation and the Suffolk Banking System
Working Paper
A model of regulated private bank-note issue
A random-matching model (of money) is formulated in which there is complete public knowledge of the trading histories of a subset of the population, called banks, and no public knowledge of the trading histories of the complement of that subset, called nonbanks. Each person, whether a banker or a non banker, is assumed to have the technological capability to create indivisible, distinct and durable objects called notes. If outside money is indivisible and sufficiently scarce, then an optimal mechanism is shown to have note issue and destruction (redemption) by banks.