Philadelphia Fed paper examines private monetary system


A working paper released by the Federal Reserve Bank of Philadelphia demonstrates the instability of a purely private monetary system, and then explores the role of public intervention.

The author, Daniel Sanches, finds that, in his model, a purely private monetary system is capable of implementing an efficient allocation of money. However, it is unstable, which can result in large fluctuations in the money supply and a self-fulfilling collapse in the system.

As such, the paper deems the

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