Abstract for: A System Dynamics Model of a Local Economy with Bi-Currency System

Local communities have no control on national and global monetary systems in spite of the fact that they are hit and damaged by economic crisis, unemployment, and other instability and insecurities caused by them. To overcome these problems, communities depending on their priorities, needs and resources, design their currency and local exchange schemes. The former research has claimed that they stimulate local production, support local businesses, create local jobs, develop sustainable consumption and enhance ecological & social wellbeing. These hypotheses are derived from relatively short-term observations due to fact that this is a new research area. However, a dynamic system modeling of a local currency system with two currencies can provide a valuable and in-depth insight into the system’s structure and its behaviors in the long run. I create a dynamic system model of a local economy with a dual primary consumption sector, one representing national chain stores working with the national currency, the other representing local stores working with the both currencies. I formulate a discounted exchanged rates policy, define model components and their interrelations, describe the structure, analyze the possible behaviors, and evaluate this model’s impact on the resilience of local economy, on local businesses and on unemployment. This is an exploratory and preliminary study.