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National Private Multi Currency System set up

  • Yasumi Matsumoto
  • Pawel Mlodkowski
Article

Abstract

As long ago as 1961 Robert Mundell proposed the introduction of many currencies in one country to deal with regional imbalances via fixed exchange rate adjustments. The purpose of this economic policy approach was to stabilize the national economy. However, this interpretation of the initial idea was long forgotten and never came into being. The reason may be attributed to many factors, mainly internal ones and the fact that the traditional form of money was a significant impediment for introducing a multi-currency monetary system in any national economy. This situation seems about to change, due to the emergence of virtual forms of money.

The aim of this paper is to present an analytical framework for studying the economics of a national multi-currency monetary system in an open economy model. The core idea is to introduce a virtual form of money and make it the sole means of payment in all kinds of transactions. We offer a solution that grants high stability of the external value of the domestic currency. Agents issuing the virtual currencies domestically are industrial and financial conglomerates, for which currency issues are backed by their fixed tangible assets and credit expansion is restricted by revenue.

It seems to us that the proposed system is an acceptable response to the increased variability in external factors that are detrimental to domestic stability. There are additional consequences of the multi-currency system that are discussed briefly.

Key words

private multi-currency system monetary policy virtual money 

JEL Classification

E51 E58 

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Copyright information

© Japan Economic Policy Association (JEPA) 2011

Authors and Affiliations

  1. 1.School of Political Science & EconomicsWaseda UniversityTokyoJapan
  2. 2.Faculty of Economics and FinanceKazakh-British Technical UniversityAlmatyKazakhstan

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