Document Type
Article
Publication Date
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.
Recommended Citation
Camera, G., (2001). Dirty money. Journal of Monetary Economics 47(2), 377-415. doi: 10.1016/S0304-3932(01)00043-5
Peer Reviewed
1
Copyright
Elsevier
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Comments
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Monetary Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Monetary Economics, volume 47, issue 2 (2001). DOI: 10.1016/S0304-3932(01)00043-5
The Creative Commons license below applies only to this version of the article.