PRIVATE VERSUS PUBLIC MONEY∗

I show that the nature of agents’ production determines whether they should issue money. I use a matching model with no commitment and no enforcement. Some agents can produce goods, whereas others are unproductive.All agents can produce at a cost a distinguishable, intrinsically useless but durable good: notes. Productive agents produce red notes whereas unproductive agents produce green notes. I find that green notes are the most efficient means of exchange, as they implement more allocations than red notes and at a lower cost. Therefore, unproductive agents should issue money. I associate unproductive agents to agents producing public goods.