We study the emergence and coexistence of monetary and credit transactions in a model where exchange is decentralized. Agents belong to different villages which are informationally separated. The frequency of meetings between any two different villages decreases as their respective geographic distance from one another increases. The equilibrium mix of monetary and credit transactions is characterized as a function of the frequency of meetings among agents from different villages. Our economy may be interpreted as a medieval economy.
Trade takes place only among a small set of nearby villages via the use of credit.
Monetary trades emerge only after interactions with faraway villages become sufficiently frequent. Even in that case, trades among nearby villages remain non-monetized. If you experience problems downloading a file check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. Please be patient as the files may be large.