Localized Complementary Currencies: The New Tool for Policymakers? The Sardex Exchange System

Sardex was created in 2010 in Sardinia, Italy. Today, it has 2500 users and it is growing exponentially. It is one of the three pilot projects of the European Union’s Digipay4Growth, which tests three complementary currencies’ capacity to provide business and access to credit to SMEs and foster growth: in Sardinia, Bristol, and Catalunya. This paper analyses the microeconomic benefits for Sardex users, building the macroeconomic framework necessary to model the Sardex network. It evaluates the advantages to consumers, firms, and policymakers, adapting the models of investment (Tobin’s q) and consumption (permanent income hypothesis) underlying the traditional IS curve, to the dual currency framework. It shows that Sardex increases consumption and investment, enabling firms to obtain higher profits, and enabling consumers to smoothen consumption by relaxing credit constraints, while supporting the local economy. Hence, it shows that Sardex produces a permanent real output gain, a countercyclical, stabilising effect on the economy, and that it provides additional sources of income for the government - besides an extraordinary economic insight into the economy.