Skip to main content Accessibility help


  • Nicola Amendola (a1), Leo Ferraris (a1) and Fabrizio Mattesini (a1) (a2)


This paper presents a pure currency economy with a nondegenerate distribution of money holdings in which, as conjectured by Wallace (Quarterly Journal of Economics 129, 259–274, 2014), there are transfer schemes financed by money creation that improve ex ante welfare relative to no-intervention. Differently from what was advocated by Wallace, pecuniary-like externalities, rather than the need to share liquidity risks, are responsible for the result.


Corresponding author

Address correspondence to: Leo Ferraris, Department of Economics and Finance, Universita’ di Roma, Tor Vergata, Via Columbia 2, Rome, Italy. e-mail:


Hide All
Bajaj, A., Hu, T. W., Rocheteau, G. and Silva, M. R. (2017) Decentralizing constrained-efficient allocations in the Lagos-Wright pure currency economy. Journal of Economic Theory 167, 113.
Berentsen, A., Camera, G. and Waller, C. (2005) The distribution of money balances and the non-neutrality of money. International Economic Review 46, 465487.
Bewley, T. (1980) The optimum quantity of money. In: Kareken, J. H. and Wallace, N. (eds.), Models of Monetary Economies. Minneapolis Fed.
Bhattacharya, J., Haslag, J. and Martin, A. (2005), Heterogeneity, redistribution, and the Friedman rule. International Economic Review 46, 305729.
Boel, P. and Waller, C. (2019) On the theoretical efficacy of quantitative easing at the zero lower bound. International Economic Review, forthcoming.
Davila, E. and Korinek, A. (2018) Pecuniary externalities in economies with financial frictions. Review of Economic Studies 85, 352395.
Friedman, M. (1969) The Optimum Quantity of Money. NYC, US: Macmillan.
Geanakoplos, J. and Polemarchakis, H. (1986) Existence, regularity and constrained suboptimality of competitive allocations when the asset market is incomplete. In: Heller, W. P., Starr, R. M., and Starrett, D. A. (eds.), Uncertainty, Information and Communication: Essays in Honour of K. J. Arrow. Cambridge, UK: Cambridge University Press.
Hart, O. (1975) On the optimality of equilibrium when the market structure is incomplete. Journal of Economic Theory 11, 418443.
Kehoe, T., Levine, D. and Woodford, M. (1992) The optimum quantity of money revisited. In: Dasgupta, P., Gale, D., Hart, O. and Maskin, E. (eds.), The Economic Analysis of Markets and Games: Essays in Honor of Frank Hahn. Cambridge, MA: MIT Press.
Kocherlakota, N. (1998) Money is memory. Journal of Economic Theory 81, 232251.
Lagos, R. and Wright, R. (2005) A unified framework for monetary theory and policy analysis. Journal of Political Economy 113, 463484.
Levine, D. (1991) Asset trading mechanisms and expansionary policy. Journal of Economic Theory 54, 148164.
Lorenzoni, G. (2008) Inefficient credit booms. Review of Economic Studies 75, 809833.
Moore, J. H. (2013) Pecuniary Externality through Credit Constraints: Two Examples without Uncertainty, mimeo.
Shi, S. (1997) A divisible search model of Fiat money. Econometrica 65, 75102.
Townsend, R. (1980) Models of money with spatially separated agents. In: Kareken, J. H. and Wallace, N. (eds.), Models of Monetary Economies. Minneapolis, MN, US: Minneapolis Fed.
Wallace, N. (2014) Optimal money-creation in pure-currency economies: A conjecture. Quarterly Journal of Economics 129, 259274.



  • Nicola Amendola (a1), Leo Ferraris (a1) and Fabrizio Mattesini (a1) (a2)


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed.