I examine, in a controlled, experimental laboratory setting, the acceptance of a secondary currency when a primary currency already circulates in an economy. The underlying model is an indivisible good / indivisible money, dual currency search model similar to that in Kiyotaki and Wright (1993) and Craig and Waller (2000). In such models, there are two pure Nash equilibria total acceptance or t...

In modelling bumble bee foraging, net rate of energetic intake has been suggested as the appropriate currency. The foraging behaviour of honey bees is better predicted by using efficiency, the ratio of energetic gain to expenditure, as the currency. We re-analyse several studies of bumble bee foraging and show that efficiency is as good a currency as net rate in terms of predicting behaviour. W...

Market participants’ risk attitudes, wealth and portfolio composition influence their positions in a pegged foreign currency and, therefore, may have important effects on the sustainability of currency pegs. We analyze such effects in a global game model of currency crises with continuous action choices, generating a rich set of theoretical comparative static predictions related to often discus...

At the end of the experiment, you will receive a show-up fee of NT$100 plus the NTD converted from the “Standard Currency Units” you have earned in the experiment. (“Standard Currency Units” are the experimental currency units used in the experiment.) The amount of “Standard Currency Units” you will receive, which will be different for each participant, depends on your decision, the decision of...

Using sovereign CDS spreads and currency option data for Mexico and Brazil, we document that CDS spreads covary with both the currency option implied volatility and the slope of the implied volatility curve in moneyness. We propose a joint valuation framework, in which currency return variance and sovereign default intensity follow a bivariate diffusion with contemporaneous correlation. Estimat...

national currency depreciation or appreciation has always been argued seriously among policymakers since changing in exchange rate could cause improvement or deficit in trade balance. these changes affect the trade volume of a country in both short-run and long-run. long-run effects are recognized as the marshall-lerner condition, while short-run effects are analyzed by two concepts: j-curve an...