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 ME  Vol.3 No.5 , September 2012
A Local Currency in a Dollarized Economy
Sokchea Lim*
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Abstract: The paper uses a dual-currency search theoretic approach to demonstrate that it is possible to induce the acceptance of a local currency in a dollarized economy. In the model, we assume that a foreign currency is in full circulation and the government policy tool is the convertibility of the local currency to the foreign currency. We show that the economy can achieve equilibria where two monies are in circulation if the government can raise a sufficiently high probability of exchange between the two currencies.
Keywords: Dual-Currency Search Theoretic Approach; Dollarized Economy
Cite this paper: S. Lim, "A Local Currency in a Dollarized Economy," Modern Economy, Vol. 3 No. 5, 2012, pp. 671-674. doi: 10.4236/me.2012.35086.
References

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[2]   R. Dutu, “Strong and Weak Currencies in a Search- Theoretic Model of Money,” Research Paper, 2001.

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[5]   B. Craig and C. Waller, “Dual Currency Economies as Multiple Payment Systems,” Economic Review, Federal Reserve Bank of Cleveland, Cleveland, 2000.

 
 
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