Computational Efficiency and Macroeconomic Stability under Centralized Exchange: Evidence from Swiss and US Exchange Data

Centralized exchange has a worst-case size-complexity many orders of magnitude lower than decentralized monetary exchange for the same number of agents and goods. A more rapid approach to competitive equilibrium may therefore be possible through centralized exchange. An additional benefit of centralized exchanges is macroeconomic stability: their volume of financial activity can be shown to vary inversely with the business cycle. This counter-cyclical tendency is shown by error-correction models, based on twenty-five years of data from a US exchange (the International Reciprocal Trade Association) and fifty-five years of data from a Swiss bank (WIR). This combination of computational efficiency and counter-cyclical activity suggests that the forms of exchange and credit enabled by these centralized exchanges may promote both microeconomic efficiency and macroeconomic stability. The financial activities of such exchanges, therefore, can complement a central bank’s monetary policy, although they do diminish its direct control of the money supply itself.