Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 9 (2018), No. 1, Pages 1-25

DOI: 10.12735/jfe.v9n1p1

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Do Payment Systems Matter: A New Look

Jim Dolmas1  Joseph H. Haslag2 

1Research Department, Federal Reserve Bank of Dallas, Dallas, TX, USA
2Department of Economics, University of Missouri-Columbia, Columbia, MO, USA

URL: https://doi.org/10.12735/jfe.v9n1p1

To Cite this Article     Article Views: 272     Downloads: 184  Since deposited on 2018-03-15

Abstract

In this paper, we consider two alternative pure payments systems—the trade of goods for goods, or barter, and trade using intrinsically valueless fiat money. Here, the term payment system refers to the method of executing mutually beneficial trades, and ‘pure’ means that each method of exchange is considered exclusively. Each payment system is examined in an economy with location-specific commodities, and households consist of vendor-shopper pairs. The household’s decision problem includes a distance-related transaction cost; that is, the cost of trading with anyone from another location increases as the distance from the home location increases. We then ask, is the equilibrium set of consumption goods—and the quantity of each type—invariant to whether the vendor or the shopper pays the transaction cost? The answer is that in economies with monetary settlements, invariance fails.

JEL Classifications: D12, D47, E42

Keywords: payment systems, transaction costs, specialization, money

To Cite this Article: Dolmas, J., & Haslag, J. H. (2018). Do payment systems matter: A new look. Journal of Finance and Economics, 9(1), 1-25. https://doi.org/10.12735/jfe.v9n1p1

Copyright © J. Dolmas & J. H. Haslag

Creative Commons License
This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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Do Payment Systems Matter: A New Look
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