International Journal of

Community Currency Research
VOLUME 17 (2013) SECTION A 45-57
Octavio Groppa*
Pontificia Universidad Cat!lica Argentina

The papei aims to show the impact that a complementaiy cuiiency may have on a national
economy fiom a theoietical point of view. A system uynamics mouel is cieateu to uesciibe the
mechanics of money issuance in capitalist economies as well as in economies wheie theie is no
insiue money. As an example, the fiist outcomes of a baitei netwoik implementeu in 2uu8 by
the STR0 founuation in El Salvauoi (calleu !"#$% '()#*)++,%#-*) aie piesenteu anu analyzeu.
Finally, using uata fiom a complementaiy cuiiency expeiience in El Salvauoi the spenuing mul-
tipliei is calculateu. The main iesult shows that theie is a gieatei spenuing multipliei in uigital
community cuiiencies systems than in iegulai money maiket. Although the magnituue of PT
netwoik is still negligible fiom a macioeconomic point of view, the iesult is a uesiieu outcome
which may help to cushion the impact of macioeconomic shocks on laboui maiket, contiibuting
to stabilize aggiegate uemanu.
* Email: octavio_gioppaÇ
%( )*+, +-*. /0+*)1,2 uioppa, 0. (2u1S) 'Complementaiy cuiiency anu its impact on the economy' .#$-(#)/
$,%#)0 1%"(#)0 %2 3%44"#,$5 3"((-#+5 6-*-)(+7 17 (A) 4S - S7 <> ISSN 1S2S-9S47
34 56%&789'%576
The expansion of IT in iecent yeais has biought about a
numbei of innovations in the monetaiy aiena. Fiims have
been expeiimenting with voucheis, uiscount coupons, sky
miles, points, anu the like, in oiuei to attiact customeis oi
pieseive them thiough loyalty piogiams. In paiallel, com-
plementaiy cuiiencies (CC), many of which use computei-
baseu exchange systems, have been giowing yeai aftei
yeai. These examples show in a gieatei oi lessei uegiee the
emeigence of the quiet new phenomenon of piivate oi non-
national moneys.
A ieview of the liteiatuie on the subject ieveals that few
stuuies piesent a theoietical appioach to the issue. Schia-
ven (2uuu) analyzes the functions anu benefits expecteu
fiom joining in a complementaiy cuiiency netwoik, but he
uoes not offei an explanation of theii mechanism. Stouuei
(1998; 2uu9) finus a countei-cyclical effect of coipoiate
baitei systems as well as the WIR Bank's cuiiency, iespec-
tively, using econometiic techniques. Pjafjai et. al. (2u12)
use piobit mouels to piove that community cuiiencies aie
complementaiy (not substitutes) of national moneys anu
that the usage of these alteinative cuiiencies is associateu
with monetaiy stability, what constitutes a iathei puzzling
conclusion. Schioeuei (2uu2), in his uesciiption of the
Tauschiing, offeis some ieflections on a hanuful of issues
ielateu to CC -unemployment, locality, ecology, between
otheis. Be uoes not eithei constiuct any foimal mouel oi
explanation, but ievisits some iueas of uesell anu his ciitics,
oi Lietaei. Kiohn anu Snyuei (2uu8), in theii stuuy of Ith-
aca Bouis, mention some chaiacteiistics of economies
wheie complementaiy cuiiencies appeai, anu uesciibe the
basic featuies of money. They also iun a mouel in the 0S
ovei the 199u's in oiuei to finu some effect of a highei
giowth iate in cities wheie complementaiy cuiiencies hau
been ueployeu, but they can't finu such eviuence.
Nost of the aiticles uesciibe the main featuies of comple-
mentaiy cuiiencies systems (CCS) in seveial expeiiences,
eithei using the case stuuy methouology (see I}CCR 2u11;
Schiouei 2uu6; Lietaei 2uu4; Bienes 2u11; Ingleby 1998)
oi conuucting suiveys (Lepofsky 2uuS; }ackson 1997).
They usually uetail the singulaiities of the implementation
in each case.
The objective of the piesent papei is to analyze fiom a con-
ceptual point of view the impact of CC in the monetaiy sys-
tem. The fiist section piesents a system uynamics mouel
which uesciibes the coie of the stiuctuie of conventional
monetaiy systems in oui economies. The following section
uiscusses what happens when a CC is intiouuceu. Thiiuly,
empiiical uata fiom the complementaiy cuiiency system
uevelopeu by the Social Tiaue 0iganization (STR0) in El
Salvauoi (calleu Punto Tiansacciones) is shown anu a fiist
attempt to measuie the spenuing multipliei within the
netwoik is maue. The final section concluues.
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:43 %-, '/@*+/1*.+ $A.+,B
In oui tiauitional economies money is cieateu thiough a
two-stage piocess. In the fiist place, a cential bank issues
uebt -money- backeu by its assets. It can be uone as a
means of monetizing a low liquiuity uebt (typically, when it
puichases goveinment's secuiities), oi else by giving cieuit
to commeicial banks. This uebt instiument has a high ue-
giee of liquiuity anu ability to be tiansfeiieu to thiiu pai-
ties, given that it is investeu with an uniestiicteu settle-
ment powei. This is what we know as the monetaiy base oi
outsiue money.
With the money ieceiveu, commeicial banks offei loans. In
tuin, boiioweu money is spent by cieuit takeis (e.g., com-
panies that puichase supplies anu pay wages). Then, a sub-
sequent ciiculation of means of payment takes place, which
peifoim a given numbei of opeiations. Theie is, on the
othei hanu, an amount of money that can be hoaiueu oi
saveu in foieign assets. Conveisely, it is also possible that
pieviously hoaiueu amounts aie ie-enteieu into the ciicuit.
In auuition, theie exists anothei poition of the amounts in
ciiculation that is ietuineu into the banking system in the
foim of ueposits. In this case, commeicial banks keep a
poition as ieseive to meet withuiawals, anu aie alloweu to
lenu the iemainuei. In so fai the oiiginal uepositoi contin-
ues using his money wiiting checks against his cuiient
account, that "iemainuei" pioviueu by the commeicial
bank is new money put into ciiculation, what is known as
insiue money anu is founueu on the uesciibeu fiactional
ieseive system (as noteu by Tobin 196S, stiictly speaking
this seconuaiy issue occuis in the system as a whole, since
cieuit cieation by one bank may be absoibeu -offset- as a
ueposit by anothei one.)
The money multipliei effect can also be seen as a uynamic
system wheie seconuaiy cieation is uefineu by a iecuisive
stiuctuie foimeu by ueposits of saveis that aie put again
into ciiculation as loans, geneiating expenuituie (con-
sumption anu investment) anu new savings uepositeu in
the banking system. Since we aie focusing in the stiuctuie
of the money cieation piocess (anu not ueteimining money
supply), foi the sake of simplicity we oveilook inteiest
iates anu the flow of loan cancellation (which coulu be iep-
iesenteu by an aiiow fiom Income to Cieuit), as well as
othei types of ueposits (saving oi time ueposits) oi even
moie complex cieuit instiuments like ueiivatives, swaps
anu otheis (which weie in the veiy oiigins of the cuiient
ciisis). The system is uepicteu in Figuie 1.
The uiagiam shows an initial flow (outsiue money) that is
tiansfoimeu into cieuit. Cieuit, fiom the siue of the cieuit
takei, is income that will be spent oi else saveu oi hoaiueu.
The spent poition is anothei agent´s income (hence the
iegiessive loop). But, given that consumption piopensity is
less than 1, this "multipliei effect" (of expenuituie oi ue-
manu, in this case) has uiminishing impact. The state vaii-
able Saving accumulates savings geneiateu on each iounu
of the spenuing multipliei. They aie enteieu in bank sys-
tem as ueposits. Banks, aftei putting asiue an amount as
ieseive, lenu them again, caiiying out a seconuaiy issuance
that will satisfy uemanu foi cieuit. Thus, bank ieseives
peifoim an entiopic function, as well as a positive net
hoaiuing. The vaiiable Boaiuing is uistinguisheu fiom Sav-
ings in oiuei to iemaik its uiveise function in ielation to
the economic system. The fiist one expiesses the commu-
nication with the "outsiue woilu", while the seconu one has
a iole in the ciiculation anu inteinal ieuistiibution of
monetaiy iesouices (allocating them, foi example, to in-
vestment). Boaiuing opeiates as a buffei ieceiving leak-
ages fiom the system. Bowevei, given that any hoaiuing
will be consumeu at some futuie time, theie is a ietuining
flow to the system that will take place in an unceitain uate.
The magnituue of this cumulative vaiiable uepenus on the
time agents want to keep theii savings outsiue the system,
which is in tuin function of ieal inteiest iates paiu on sav-
ings within the system anu on the ability to maintain the
value of such amounts (e.g., by puichasing exteinal assets,
pioviueu, of couise, that its value is not oveiestimateu, as
in a financial bubble). The mouel is iueal in so fai as it ex-
plains the stiuctuie of the money cieating piocess, without
iefeience to the behavioui of ieal vaiiables. That is, the
amount of cieuit issueu is ueteimineu by uemanu, which is
heie an exogenous magnituue. Finally, notice that this sys-
tem is uefineu by macioeconomic functions, anu not by
types of actois oi cuiiencies. In othei woius, those func-
tions may be peifoimeu using cash, e-money oi othei cui-
iencies, whatsoevei.
Theiefoie, the system has two instances of iecuision (oi
"multiplieis"), which foim both geometiic seiies: spenuing
anu monetaiy issuance.
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Figuie 1 can be expiesseu as a simple system of uiffeience
equations baseu on the uefinition of the vaiiables that
compiise it. Foi simplicity, we assume that net hoaiuing is
Wheie 8t is income geneiateu within the monetaiy cycle t;
9 is the maiginal piopensity to consume; :$ is velocity
(with : assumeu to be fixeu), that is, the numbei of outlays
peifoimeu by monetaiy cycle (t) with a same oiiginal in-
come; Ci is cieuit; -; anu -< aie outsiue money (which at
fiist is uata) anu insiue money, iespectively; anu =, uepos-
its. The system can be summaiizeu as:
Figure 1. Diagram of money creation under capitalism
if only two cycles of issuance aie consiueieu. If it is uesiieu
to extenu the time peiiou, so that theie weie incluueu w
peiious of monetaiy iecuiience, the expiession takes the
following foim:
so that if :$ anu > tenu to infinity,
which summaiizes the effects of both multiplieis. The uis-
tiibution in time of the multipliei effect uepenus, theiefoie,
on the velocity of ciiculation of money.
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A CCS aims to cieate a submaiket wheie means of payment
ciiculate, pieventing leakage fiom the system (ieuucing
entiopy) anu hence maximizing local laboui. It opeiates as
a soit of viitual maiket piotection.
Peihaps an element that uistinguishes CCS fiom puie mu-
tual cieuit systems is that the fiist ones function as an
economy with a fixeu oi auministeieu exchange iate with
ieseives to backup legal tenuei (foieign cuiiency anu¡oi
some soit of commouity, like golu). This uesign facilitates
the ieciuitment of membeis to the netwoik, since anyone
who enteis is able to exit whenevei he wants, getting the
money oiiginally uepositeu back (on payment of a tax that
punishes withuiawals).
Since theie is no financial inteimeuiation, CC confoim
monetaiy systems with no ueposits (anu no bank ie-
seives); hence, savings can be lent uiiectly fiom suiplus
supplieis to cieuit uemanueis. In othei woius, to peifoim
an economic opeiation any peison can obtain means of
payment in two ways: eithei thiough uiiect lenuing of sui-
plus income fiom a thiiu paity (which, stiictly speaking,
woulu be a ieuistiibution), oi by cieating new money
(piimaiy issue oi outsiue money). Insofai theie aie no
incentives to the accumulation of suiplus income, almost
all income is spent within a given lapse time, anu inteiest
iates can be close to zeio. The monetaiy system is now
simplei (see figuie 2 below).
This means that now c =u anu, so, 8$ in (2) is laigei. As it is
obvious, fiom the othei siue, to get a similai level of 8, a
system with no insiue money neeus a gieatei piimaiy issue
It shoulu be noteu that a monetaiy system is a stiuctuie of
infoimation on ielative balances of membeis within an
exchange community. What uistinguishes one system fiom
anothei aie uesign featuies, such as the magnituue of ag-
giegate imbalances that will be toleiateu (as well as theii
aveiage uuiation), the magnituue of the imbalances each
membei is alloweu to have (access to cieuit, its peiiou), the
authoiity empoweieu to make such uecisions (banks, the
community as a whole thiough any establisheu pioceuuie
of social choice), ciiteiia unueilying those uecisions (iate
of R0I ¡ NPv, oi, iathei, in viitue of values of a uiffeient
natuie -social, ecological, etc.), oi what money iepiesents,
that is, what is its ieal iefeience -the thing- oi, put in an-
othei way, what kinu of suppoit it has (the woik of mem-
beis, a thiiu cuiiency, a commouity, othei kinu of goous,
assets oi membeis' piopeity).
Bowevei, the benefits of the analyzeu uesign fiom the
theoietical point of view aie paiticulaily qualifieu when
analyzing the economic peifoimance of these subsystems.
As it was mentioneu, the main objective of these expeii-
ences is to ensuie local laboui. Thus, the effect fiom the
macioeconomic stanupoint is limiteu (vasconcelos Fieiie
2u11, 126). The fact of not pioviuing laige cieuit amounts
is also an impoitant baiiiei foi theii expansion. Actually,
the laigest economic ciicle, the Swiss WIR, became a bank
when auministiatois ueciueu to offei loans beyonu the
meie ieuistiibution of suipluses among its membeis, that
is, issuing means of exchange ovei the amount of open
cieuit balances (cieating theiefoie insiue money) (Stuuei
E4: =/)0(,)(D(B*) *B@/)+ (I ''$
The intiouuction of a CCS has many angles to be analyzeu
iegaiuing its impact on the maiket. We mention paiticu-
laily the effect on spenuing, inteiest, inflation anu business
Beginning with the effect on total spenuing, a complemen-
taiy cuiiency expanus aggiegate uemanu via an inciease in
the spenuing multipliei. As noteu, by uiscouiaging the stoi-
age of suipluses without application, maiginal piopensity
to consume giows, piouucing an inciease in consumption
anu the use of local laboui. That is, income is completely
spent (within a given time lapse), so that Say's law is ful-
filleu within the system.
Let us see this foimally. When a complementaiy cuiiency is
intiouuceu, ciiculation of legal tenuei is uiminisheu by the
amount of money set asiue to suppoit the new monetaiy
subsystem. Bowevei, total spenuing is incieaseu because
consumption incieases in CC, as this has a lowei (aggie-
gate) saving iate than legal tenuei (oi what is the same, a
consumption piopensity that is on aveiage equal oi next to
At any moment, ueposits (?i) aie a poition u of income (8).
With @+9 = 1 we can expiess:
wheie ?, aie new ueposits maue at the moment i, expiesseu
as a piopoition @ of income (8)
Now assume that at time k a poition of money in ciicula-
tion is put asiue to suppoit a CC; consequently, spenuing on
legal tenuei will be ieuuceu on that amount by uiminishing
the aveiage saving iate (@), as seen below. Being 1 the
numbei of agents, the aveiage savings iate of the economy
is the aveiage saving iate of each membei weighteu by the
piopoition between theii income anu total income.
Bisciiminating two gioups uepenuing on the cuiiency
useu, anu uefining AB7 as the piopoition of expenuituie on
each cuiiency 7 foi eveiy agent B, weighteu by CB, savings in
D will be uefineu by:
wheie subsciipt 7 = 1 inuicates the piopoition of spenuing
on legal tenuei, while the value 2 is the spenuing which
uses complementaiy cuiiency. Bowevei, since @< tenus to
zeio, given that theie is no incentive to the accumulation of
savings in the subsystem:
Fiom then onwaius, total expenuituie will be uone in two
being y the expenuituie uone in complementaiy cuiiency,
anu !4¡!E the ielationship of piice inuexes in each system
(legal tenuei anu complementaiy cuiiency, iespectively),
which opeiates as a conveitei foi puichase powei paiity oi
ieal exchange iate. It is expecteu that !4F!E > 1, given that
complementaiy cuiiency has a limiteu scope.
Figure 2. Diagram of money creation in a mutual credit system
0n the othei hanu, the effect in time of the money multi-
pliei will conuition expenuituie (Y) thiough the following
So that, if in moment D a complementaiy cuiiency is intio-
uuceu, the pievious expiession can be split in two peiious,
anu expenuituie in legal tenuei will be conuitioneu by:
wheie GD is the weight of the money ieseiveu as suppoit in
teims of expenuituie till time k:
so that at time D a ueciease (HD) of the amounts object of the
iecuiience is piouuceu. It shoulu be iemembeieu, how-
evei, that in this simplifieu mouel, we aie not accounting
foi loan cancellations. Plainly, this flux woulu appeai sub-
tiacting in the uenominatoi, so that the ieal impact (in
monetaiy teims) of the intiouuction of a CC in an economy
woulu be highei than the one iepiesenteu by this foimula.
Then, in any cycle subsequent to D income will be:
Analogously, foi activity uone in complementaiy cuiiency:
since @< tenus to zeio within the CC subsystem. Bowevei,
fiom the peiiou k+2, y uoes not lose the poition ieseiveu
as backup, so that:
Thus, unuei a bi-monetaiy system with CC, total spenuing
(oi income, Y) is (in shoit teim) highei than the one which
occuis unuei puie capitalist system because of the inciease
in the piopensity to consume.
As can be ueuuceu, intiouucing a CC opeiates as a ueciease
in iates of inteiest via the ieuuction of the ielative weight
of inteiests paiu in ielation to expenuituie, since inteiest
iate is i= Inteiest amount¡Y, anu, as was aigueu, Y=u<u*.
Thus, the gieatei numbei of tiansactions initiateu in the
same oiiginal loan (uue to inciease in the multipliei) ie-
sults in a ieuuction of the aveiage amounts paiu as inteiest
ielateu to spenuing oi, what is the same thing, that spenu-
ing has a highei uegiee of leveiage in teims of cential
bank's monetaiy base.
This conclusion can be unueistoou fiom the opposite siue if
CCS aie consiueieu as a scheme of coopeiative veitical
integiation. In this sense, van Aikel, uiiectoi of STR0, men-
tions an inteiesting example. Assume that NcBonalu's was
uisjointeu between all its stages, that is, piouuction of in-
puts, piouucts, seivices, fianchising, in so many sub com-
panies as uepaitments exist. Eveiy small business must
then obtain theii own financing foi theii investments, foi
woiking capital anu even to establish contingency ieseives
(paying an inteiest iate on loans), because it must pay its
supplieis with money what befoie was uone by an inteinal
compensation system. The tasks peifoimeu anu piouucts
offeieu aie the same as befoie, but now they pay a much
highei financial cost, which eventually enu up ieuucing the
piouuct level.
It is woith asking what happens when cuiiency suffeis
fiom a high iate of inflation. In such a case the ieseive that
suppoits complementaiy cuiiency will suffei a loss in its
value, so that it will also opeiate as a uisincentive to get out
of the netwoik. Bowevei, such a situation woulu mouify
piice ielation against local system, spaiking foices that
woulu offset that effect -via "leakage" oi "capital flight",
equivalent to uevaluation (Pfjajfai et. al. 2u12). While cui-
iency exchange between local cuiiency anu legal tenuei is
geneially uiscouiageu (oi even piohibiteu), this piactice is
all but inevitable if the tiauing community is laige, so that
systems enu up functioning as a quite flexible exchange
iate scheme. These netwoiks encouiage fuithei paitici-
pants to peifoim theii tiaue in local cuiiency by 1uu%.
Bowevei, neithei this auvice may be maue effective by
coeicion, so that is one of theii weak points (Stuuei 1998).
CCS can also peifoim financial tiansactions beyonu the
task of offsetting uebits anu cieuits. If so, they can cieate
money by lenuing. This is what WIR Bank, of Switzeilanu,
uoes. This bank was boin in 19S4 as a consumei ciicle
staiting in 19S2 to issue auuitional cuiiency loans, anu
chaiging a mouest inteiest (aiounu 2%) to covei loan
losses (Stuuei 1998). In that yeai, WIR Bank ienounceu
chaiging cieuit balances (known as uemuiiage), a uesell's
iuea which aimeu at uiscouiaging hoaiuing. Cuiiently
(2u1S), the maximum iatio of inteiest chaigeu by WIR is
1,8% foi meuium teim ueposits (see: WIR
biings togethei Swiss SNEs. Stouuei (2uu9) founu that the
evolution of activity in WIR cuiiency has a statistically sig-
nificant counteicyclical behavioui (at least until 1974),
what may be anu eviuence of the iole that CCS peifoim,
cushioning exteinal shocks by a paitial anu viitual closuie
of the economy, piotecting inteinal laboui. This featuie is
peihaps the main attiaction of these expeiiences.
The same occuis, howevei, when macioeconomic cycle
iuns thiough an expansionaiy phase. Then ciicuit activity
slows uown oi enteis uiiectly into a uoimant state. That
might be occuiiing piesently with "Ciicuito Compias" ue-
velopeu by the Social Tiaue 0iganisation (STR0) in Poito
Alegie. The enoimous giowth Biazil showeu in the fiist
uecaue of XXI centuiy ueteimineu that viitually no tiansac-
tions weie iecoiueu ovei last yeais.
In any case, it is iemaikable that complementaiy cuiien-
cies may opeiate as counteicyclical uevices that viitually
cl ose the economy (thiough i nsti tuti onal , non-
uiscietionaiy, means) when it faces the onslaught of extei-
nal constiaints oi shocks. The gieat baiiiei that such sys-
tems must oveicome is in any case the necessity to ieach
such a volume that uemanu of goous is met within the same
Finally, it shoulu be noticeu that the main featuie of piivate
cuiiencies (also calleu "quasi-cuiiencies", because of its
lack of geneial acceptance) is pioviuing what in teims of
uiesham's law is "bau money", because they uo not seive
as a stoie of value. As noteu by uesell (1916), the viitue of
"bau" money is that it has gieatei ciiculation than the
"goou" one, theiefoie enhancing economic activity anu
avoiuing iecuiient ciises motivateu in unuei consumption.
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%&"6$"''576<$ LF%M
J43 N,D,0/1 I,/+H0,.
Some of these featuies weie implementeu by STR0 in its
CS systems. A CS system aims to integiating commeicial
cieuit fiom pioviueis by implementing a netwoik of elec-
tionic cuiiency payments. Foi this puipose, STR0 uevel-
opeu the softwaie Cyclos which links all netwoik membeis'
balances, facilitating the ciiculation of income anu opeiat-
ing as ieal-time cleaiinghouse. The system allows making
payments via mobile phones oi Posnet, so that it meets the
mentioneu chaiacteiistics.
Piopeily, CS uevice integiates into a unique exchange sys-
tem commeicial cieuit (hence its name, Commeicial Cieuit
Ciicuit, CS) oi cieuit fiom pioviueis, usual in oui econo-
mies, so to conveit those cieuits into tiansfeiable iights
ciiculating among netwoik membeis, in the way a check is
enuoiseu. uiven that it uoes not ieceive ueposits noi offeis
loans fiom such ueposits, it is excluueu fiom Bank Act.
The system gives membeis the oppoitunity to have a guai-
anteeu minimum uemanu foi theii piouucts oi offei uis-
counts to customeis outsiue the netwoik, using paitial
payment in CS cuiiency, thus maximizing the use of local
laboi. This situation is cleaily seen if it is iemembeieu that
complementaiy cuiiency cannot be useu to impoit oi as a
stoie of value.
Though theie is no stanuaiu foim of CS system, cuiiently
theie exist ciicuits of this type implementeu in El Salvauoi
(Punto Tiansacciones), Bonuuias (Reu Suchitoto, wheie
notes aie useu) anu Poito Alegie, Biazil (Ciicuito Com-
pias). 0veiall, membeis aie ueuicateu to tiaue anu seivice
activities. In the following paiagiaphs, we will concentiate
on the Punto Tiansacciones (PT) case.
Punto Tiansacciones is a kinu of baitei oi CC system that
woiks thiough Inteinet. It began opeiating in 2uu8 in the
aiea of San Salvauoi. The netwoik was set up in oiuei to
stiengthen small enteipiises in El Salvauoi. These fiims
suffeieu fiom a lack of woiking capital anu at the same
time they hau a piouuction capacity which they coulu com-
pletely sell off.
The methouology was baseu on an analysis of uiffeient
netwoiks in Latin Ameiica anu Euiope anu with new in-
sights fiom the Butch founuation STR0 it was auapteu foi
small businesses in El Salvauoi.
In the following yeais most small businesses associateu
weie iunning out of cash uue to a shaip ueciease in sales
as a consequence of the oveiall economic ciisis (see Figuie
S). Theii cash flow situation ueteiioiateu iapiuly anu they
coulu not get moie cieuit fiom the banks. Thiough this
system, though, seveial companies coulu get the extia
woiking capital neeueu.
Figure 3. El Salvador GDP (quarterly, annual variations)
At the enu of 2u12, PT hau about Suu companies anu a
hunuieu of inuiviuual consumeis affiliateu, opeiations
having geneiateu the equivalent of neaily $ 2.2 million in
the yeai. The numbei of membeis giows steauily in a lineai
fashion (Figuie 4), as a iesult of a moueiation of the iate of
affiliation of businesses in 2u12, anu a gieatei iate of inui-
viuual membeiships fiom 2u11 onwaius (Figuie S). While
the system still fails to covei opeiating costs, piojections
inuicate that in 2u1S woulu become self-sustaining.
In 2u12, a suivey between entiepieneuis founu that 6u%
hau a significant inciease in sales (S4% saiu it uiu a little
bit) anu about 7u% hau financeu opeiations with comple-
mentaiy cuiiency.
0thei infoimation collecteu fiom the system uatabase is
equally eloquent.
If we analyze the evolution of the system in these eaily
yeais, it can be seen that, even though 2uu9 was a yeai
when uBP fell S.S points, total tuinovei within the netwoik
giew anu continues giowing since it was launcheu in Apiil
2uu8 (Figuie 6).
This inciease is uue to a iemaikable inciease in the num-
bei of tiansactions, but also to an inciement in the aveiage
value of puichases maue within the netwoik, paiticulaily
fiom companies, which aie iesponsible foi 8u% of the op-
eiations within the netwoik (Figuie 7).
Figure 4. PT members
Figure 6. Total PT turnover
Figure 7. Purchases in PT by firm and consumers
Figure 5. PT members, individuals and companies
The aveiage value of the uebit anu cieuit balances piesents
a slight uiffeience in favoi of the lattei, which is offset by
the gieatei numbei of membeis with a uebit balance.
In oiuei to tackle with the possibility that membeis with
cieuit balances maintaineu this situation in viitue of not
finuing the goous anu seivices they neeu within the net-
woik, the auministiation holus a cash funu, confoimeu by
units paiu in cash. The cash is useu to buy goous outsiue
the netwoik anu sell them to membeis with a high cieuit
balance in units. By August 2u12, the funu amounteu to
It is also woith noting a slight inciease of uebit positions
with iespect to total tuinovei along these yeais. Neveithe-
less, except in 2u11, when theie weie ieciuiteu many new
membeis, it can be seen that by the enu of eveiy yeai, oi in
the fiist quaitei of the following (like in 2u1u), membeis
with a uebit iesult tenu to cleai theii positions (Figuie 9).
Bowevei, this giowing tienu can be noticeu even if unspent
balances by quaitei aie uiviueu by the numbei of membeis
(Figuie 1u). This means that ovei time PT netwoik has
expanueu the aveiage balance to be spent by each membei
within the netwoik. Shoulu this tienu continue going, au-
ministiatois woulu have to inteivene allowing, foi exam-
ple, mutual loans chaigeu with a mouest inteiest (touay
theie aie no inteiests oi chaiges paiu on cieuit oi uebit
balances), so that those with cieuit balances lenu theii sui-
pluses to those who uemanu extia cieuit, thus moueiating
the iate of new issues anu pieventing the iisk of a bioau
inciement in piices uue to ovei-issue. Anyway, it shoulu be
stateu that cuiient situation is biaseu by the fact that the
netwoik is still going thiough its initial anu expansionaiy
phase. In a maximizing efficiency system, ciiteiia to uefine
the amount of open unbalanceu positions ("tiansactions
uemanu foi money", in Keynesian teims) shoulu be in pio-
poition (in the limit, iuentical) to the total amount ex-
changeu in a given peiiou (foi example, a uay, a month,
In sum, while this uata must be followeu closely by aumin-
istiatois, it is neeueu extia infoimation anu a moie exten-
sive seiies to uiaw any uefinite conclusion.
0n this iegaiu, it shoulu also be taken into account that the
piice system ieflects the ielative supplies of goous anu
seivices within an exchange community in a given peiiou.
Bence, to the extent that the supply of goous anu seivices
within the netwoik uo not ieplicate the piopoition veiifieu
in the official maiket, ielative piices within the netwoik
shoulu be uiffeient. But, in that case, those with an auveise
piice iatio will tenu to aibitiate buying anu selling outsiue
the netwoik its inputs anu goous piouuceu with the benefit
of a lowei financial cost within the netwoik. These aie the
"canuiuates" to maintain open cieuit balances.
Figure 9. Debt position with respect to total turnover
Figure 8. Firms with debit or credit balance, value and quantity
Figure 10. Debt balance per member
0n the othei hanu, it is inteiesting to note the evolution of
the numbei of customeis pei fiim. Fiom what is stateu
above, it is eviuent that a mutual cieuit netwoik can only
be sustaineu if theie is a well-establisheu economic inteiac-
tion among membeis. In this sense, we see in Punto
Tiansacciones a quiet lineai inciease, quaitei aftei quaitei,
in the numbei of customeis pei fiim. Bowevei, this in-
ciease is mainly uiiven by a limiteu numbei of companies,
which is manifesteu in a high maximum numbei of clients
ieacheu by some fiims (7u), but giowing stanuaiu uevia-
tions of the seiies anu low meuian foi the uistiibution (9),
inuicating that theie is still a significant maigin to giow
fuithei in this sense.
Conceining the channels useu foi opeiations, theie is a
giowing tienu in the usage of SNS anu Posnet, in a context
wheie tiansactions via web pieuominate. This inciease is
noticeable in consumei puichases by non-membeis.
If uata is analyzeu by sectoi of activity, the bulk of mem-
beis is uistiibuteu between piofessional seivices (mainly,
publicity, health seivices anu computei technical seivice),
hotels anu iestauiants, anu inuustiy (automotive, giaphic,
textile anu office supplies). In }uly 2u12, the uistiibution of
the amounts exchangeu by categoiy of activity anu buyei
(uebtoi) oi sellei (cieuitoi) position was as follows:
Finally, it is woith noting that the appeal of complementaiy
cuiiencies is that El Salvauoi has a uollaiizeu economy, so
it lacks the possibility of uoing any monetaiy policy in case
of an exteinal constiaint.
J4: %-, .@,DO*DP BH1+*@1*,0 Q*+-*D F% D,+Q(0R
As it was stateu, the main benefit of a CC is its powei to
cushion exteinal shocks on a community. This goal is
achieveu since a local cuiiency cannot be useu to tiansact
outsiue the community. In the seconu section we have seen
how the spenuing multipliei woulu be incieaseu fiom a
theoietical point of view, given that theie aie no incentives
to hoaiuing. In this paiagiaph we expose a pieliminaiy
calculus of the spenuing multipliei within PT netwoik fol-
lowing a uynamic methou. It was calculateu thiough a
computei piogiam uevelopeu au hoc. Punto Tiansacciones
uatabase iegisteis eveiy tiansaction maue, offeiing a lot of
infoimation such as buyei anu sellei IB, amount of the op-
eiation, chaiacteiistics of membeis, etc. (foi moie uetails,
see Appenuix.)
It was calculateu the final amount tiansacteu fiom each
cieuit issue, the consequent value of the spenuing multi-
pliei, the numbei of tiansactions involveu anu the time
lapse until the oiiginal uebt is ieueemeu. Note that, as was
explaineu, a same tiansaction may be incluueu in seveial
ciicuits when the buyei uses his cieuit balance paitially.
0nfinisheu ciicuits, that is, cieuits that weie not totally
ieueemeu (so that they aie still geneiating income within
the netwoik), weie excluueu fiom the calculus so as to
Figure 11. Statistics of number of clients by firm
Figure 12. Channels of payment
Table 1. Distribution of traded volumes in PT, by sector
of activity, 2012 (until July)
Sector of activity As buyer As seller
Construction 3.0% 2.6%
Industry 12.6% 10.9%
Commerce 9.8% 8.8%
Hotels and restaurants 18.5% 15.8%
Turism 0.4% 0.6%
Education 1.0% 1.0%
Professional Services 22.5% 21.0%
Buseness Services 8.6% 7.1%
Non Profit Org. 0.3% 0.3%
Consumers 5.6% 6.1%
Punto Trans 10.2% 18.7%
N/D 7.5% 7.0%
Author’s elaboration on the database of PTrans Author’s elaboration on the database of PTrans Author’s elaboration on the database of PTrans
avoiu a uownwaiu bias. The total numbei of ciicuits ana-
lyzeu is SS2u.
The uistiibutional uata of these vaiiables is the following:
0.4 0.4 1 1 0
1.1 1.2 1 1 21
2.0 2.3 1 1 53
6.4 8.4 1 1 131
28.2 49.5 1 1 317
99.2 384.9 2.1 2 596.5
280.5 11,443.6 131.5 243.5 820
470.1 25,956.2 424.2 542.5 940
1,478.4 73,136.8 3,482 1,406 1,151
119.1 4,352.7 191.5 88.2 386.3
342.7 16,454.3 2,410 313.1 294
The aveiage amount of tiansactions is equivalent to 0S$
119.1, anu the aveiage multiplieu amount, of 0S$ 4,SSS.
This yielus an aveiage spenuing multipliei of 191.S. Any-
way, this value is equivocal, since the uistiibution is fai
fiom being a noimal one. That is, tiansactions aie accumu-
lateu in the left tail of the uistiibution. This can be seen in
the pievious table since it shows that the meuian of the
numbei of tiansactions oi the multipliei value is 1, what
means that a half of cieuit issuances aie not multiplieu.
They aie cancelleu out by a sale of a gieatei amount than
the oiiginal uebt aftei new cieuits have been emitteu.
If we excluue non-multiplieu cieuits, so that the exposition
of uata is not biaseu by extieme values, the uistiibution of
fiequencies of the spenuing multipliei takes the following
foim (values tiuncateu at 1uu):
J4E 7D +-, )(B@/0*.(D (I 8F$ /DO 1,P/1 +,DO,0 BH1+*S
It is impoitant to iemaik that the kinu of analysis pei-
foimeu heie (the fiist of this type, as fai as we aie awaie
of) can be caiiieu out because of the utilization of elec-
tionic money. In consequence, it is haiuly possible to com-
paie these iesults with the peifoimance of legal tenuei
maiket, since estimates of the velocity of ciiculation in this
maiket in a stiict, uisaggiegate anu uynamic fashion cannot
be maue uue to the lack of infoimation. We haven't got a
tiack of the ciicuit any oiiginal issue peifoims. 0sually,
estimates of the spenuing multipliei aie maue uepaiting
fiom estimates of consumption piopensity. Anothei possi-
bility is to ielate uioss Piouuction value to money issueu
oi monetaiy liabilities. Bowevei, these methous uo not
take into account the time lapse the ciicuit takes to com-
plete its iounu. They aie static estimates.
Actually, time is vaiiable within tiansactions anu has a
uecisive impact on iesults. The uistiibution of the uuiation
of each ciicuit (incluuing theii successive bianches) is
shown in the following giaph:
Regaiuing the methou to implement any compaiison, theie
aie still othei obstacles to be oveicome. 0n the one siue, we
lack estimates of auueu value within PT netwoik, but, on
the othei, though theie aie available upuateu estimates of
Salvauoiian uBP theie aie not upuateu figuies of aggiegate
gioss piouuction value (uPv). The most iecent numbei is
fiom 2uuS Economic Census. 0ui estimates will, then, use
the iatio between uPv¡uBP in that souice, to get an esti-
mate of uPv fiom 2uu8 to 2u12. Though these iesults may
be biaseu, we uo not neeu an accuiate estimate but just an
iuea of the oiuei of magnituue of the velocity of ciiculation.
0nce we have oui uPv estimate, we pioceeu to ielate it to
money. In this concein, theie is also anothei iemaik that
shoulu be uone. As it was explaineu, in official maiket
money is issueu in a two-stage piocess. Since within PT
netwoik theie is no insiue money, we will compaie uPv
with both cash anu N2 (which incluues cash, cuiient ac-
count, saving anu time ueposits). Actually, the seconu op-
Table 2. Distribution data of variables related to the
spending multiplier
Figure 13. Histogram of multiplier value
Figure 14. Distribution of credit circuits by duration
tion is moie accuiate, since the fiist one incluues not only
spenuingu, but also money multipliei.
Besiues, total tuinovei within PT netwoik neithei is stiictly
compaiable with uPv, since PT netwoik uoes not incluue
the totality of stages of eveiy value chain, noi uoes it in-
cluue ciitical biaches of Salvauoiian economy, like Agiicul-
tuial sectoi, oi, by its veiy uefinition, financial sectoi. Be-
siues, uata of final oi inteimeuiate "impoit" goous anu
seivices (that is, piouuceu in the official maiket but solu
within PT netwoik) is not available in the uatabase. Finally,
the fact that the netwoik is still in its expansion yeais
woulu be anothei souice of noise. The iesults aie as follow
(figuies in millions):
Year GPV
ing Mul-
ing Mul-
48,220 8,247.19 5.8 1,662 29.0
46,487 8,317.16 5.6 1,775 26.2
48,191 8,615.16 5.6 2,134 22.6
51,964 8,644.08 6.0 2,382 21.8
53,520 8,741.27 6.1 2,467 21.7
Source: author’s estimates based on Salvadorian Central
Bank of Reserves data (Ingreso Nacional Dis-
ponible and Panorama monetario) and 2005
Economic Census.
Source: author’s estimates based on Salvadorian Central
Bank of Reserves data (Ingreso Nacional Dis-
ponible and Panorama monetario) and 2005
Economic Census.
Source: author’s estimates based on Salvadorian Central
Bank of Reserves data (Ingreso Nacional Dis-
ponible and Panorama monetario) and 2005
Economic Census.
Source: author’s estimates based on Salvadorian Central
Bank of Reserves data (Ingreso Nacional Dis-
ponible and Panorama monetario) and 2005
Economic Census.
Source: author’s estimates based on Salvadorian Central
Bank of Reserves data (Ingreso Nacional Dis-
ponible and Panorama monetario) and 2005
Economic Census.
Source: author’s estimates based on Salvadorian Central
Bank of Reserves data (Ingreso Nacional Dis-
ponible and Panorama monetario) and 2005
Economic Census.
As it was noteu, seveial conuitions iestiict the compaiison
between the spenuing multipliei calculateu thiough both
uiffeient methous, within PT netwoik anu in legal tenuei
maiket, iespectively. Anyhow, the iesults exposeu show
some eviuence in favoi of the thesis sustaineu along this
woik, that complementaiy cuiiencies enhance ciiculation
of money compaieu with legal tenuei maiket.
Bowevei, these iesults shoulu be taken piuuently anu
moie ieseaich is neeueu to uiaw uefinite conclusions. As it
was shown, theie is a significant amount of uebit open bal-
ances within PT netwoik (anu even a giowing tienu in
these fiist expansion yeais if they aie ielateu to total tuin-
ovei). This means that theie aie many tiansactions that aie
not computeu in the uynamic methou of calculus, since it
only takes into account cancelleu ciicuits, which woulu be
actually incluueu if the static estimate was useu.
T4 '76'G9$576$
Complementaiy cuiiencies may be a useful tool foi local
uevelopment, in so fai as they geneiate an augment of the
uemanu multipliei. The cieation anu maintenance of such
systems, howevei, is not exempt fiom uifficulties. Anyhow,
the uevelopment of new technologies is gieatly facilitating
theii uevelopment. The ease of access to the means of ex-
change can be of gieat impoitance foi uevelopment, pai-
ticulaily its effect on ieuucing inteiest iates.
Naybe, unuei the cuiient context of global economic ieces-
sion, with inteiest iates close to zeio, the benefits of these
systems uo not seem so manifest. Neveitheless, the fact of
having a uiiect link with the ieal economy anu of limiting
financial complexity thiough successive leveiages pioviues
a guaiantee against volatility anu even helps cential bank
policy by its expansionaiy effect on aggiegate uemanu. In
pait this situation is cuiiently being expeiienceu by global
economy: with minimum inteiest iates, speculation oppoi-
tunities aie ieuuceu, anu with them the chains of leveiage
that aie peimanent souice of systemic iisk. Bowevei, the
liquiuity-tiap context of cential economies pievents aggie-
gate uemanu fiom ieacting to monetaiy impulses. Peihaps
it's time foi complementaiy cuiiencies. As seen in
Longhuist anu Seyfang (2u11), they aie an alteinative that
many communities finu to piotect local laboui fiom au-
veise effects which aie not theii iesponsibility, but which
they suffei as victims.
In this iespect, the case of Punto Tiansacciones, in El Sal-
vauoi, seems to be illustiating seveial of the facts pie-
vieweu by theoiy. Activity within the netwoik incieases in
spite of the low giowth (oi even the ietiaction) expeii-
enceu by Salvauoiian economy, small companies access to
cheap cieuit, anu so they see how theii sales giow, etc.
Fiom a macioeconomic stanupoint, a CCS boosts the spenu-
ing multipliei, which means that the use of local laboui will
be maximizeu. To get a cleai explanation of this featuie was
the goal of the piesent papei. Ceitain eviuence that sup-
poits what theoiy pieuicts was also exposeu by calculating
the spenuing multipliei in Punto Tiansacciones baitei
netwoik anu compaiing it with an estimate of official
money multipliei.
In times when local communities aie being shockeu by the
suuuen gusts of capital movements, complementaiy cui-
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