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The multiplier effect of convertible local currencies : case study on two French schemes

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Abstract

Convertible local currencies are alternative monetary instruments issued by groups of citizens to circulate in a given territory. They are used by businesses and citizens who accept it as means of payments constituting, hence, a monetary community. Their impacts on economic activity are mainly related to their circulation within the user community. Businesses that have received local currency as payment must spend it with other members. A local currency, thus, acts as a constraint favoring the development of new commercial relations in the network and increasing the demand among local businesses involved in the scheme. In this article, we model the income circulation between convertible currencies users as a local multiplier, called the convertible local currency multiplier. By using the Local Multiplier 3 empirical approach (Sacks, 2002) on two convertible currencies transactions data, we compute an indicator summarizing the income generated for the monetary community by the change and expense of euros into a local currency. This new indicator enables not only consumers to estimate the impact of their actual consumption in local currency, but also potential public decision-makers to know the total effect of their expenses when they use local currency on their territory to finance some of their policies. For example, this indicator could be used to measure the direct and indirect effects of a subsidy paid in local currency to institutions, businesses or households. The computed multiplier is greater than two for both currencies, which is in the higher range of LM3 estimated in the literature.
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halshs-03324625 , version 1 (06-09-2021)

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  • HAL Id : halshs-03324625 , version 1

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Oriane Lafuente-Sampietro. The multiplier effect of convertible local currencies : case study on two French schemes. 2021. ⟨halshs-03324625⟩
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