Creator: Weber, Warren E. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 344 Abstract:
This study examines the pricing of U.S. state banknotes before 1860 using discount data from New York, Philadelphia, Cincinnati, and Cleveland. The study determines whether these banknotes were priced consistent with their expected net redemption value as securities are. The evidence is mixed. Prices for a bank’s notes were higher when the bank was redeeming its notes for specie than when it was not, and banknote prices generally reflected the costs of note redemption. However, the relationship between prices and redemption costs was not tight, and there were cases in which the notes of distant banks went at par.
关键词: Bank Notes, Currency, and State Banks 学科: N21 - Economic History: Financial Markets and Institutions: U.S.; Canada: Pre-1913 and E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
Creator: Kiyotaki, Nobuhiro, Matsui, Akihiko, and Matsuyama, Kiminori Series: Monetary theory and financial intermediation Abstract:
Our goal is to provide a theoretical framework in which both positive and normative aspects of international currency can be addressed in a systematic way. To this end, we use the framework of random matching games and develop a two country model of the world economy, in which two national fiat currencies compete and may be circulated as media of exchange. There are multiple equilibria, which differ in the areas of circulation of the two currencies. In one equilibrium, the two national currencies are circulated only locally. In another, one of the national currencies is circulated as an international currency. There is also an equilibrium in which both currencies are accepted internationally. We also find an equilibrium in which the two currencies are directly exchanged. The existence conditions of these equilibria are characterized, using the relative country size and the degree of economic integration as the key parameters. In order to generate sharper predictions in the presence of multiple equilibria, we discuss an evolutionary approach to equilibrium selection, which is used to explain the evolution of the international currency as the two economies become more integrated. Some welfare implications are also discussed. For example, a country can improve its national welfare by letting its own currency circulated internationally, provided the domestic circulation is controlled for. When the total supply is fixed, however, a resulting currency shortage may reduce the national welfare.
关键词: Money as a medium of exchange, Random matching games, Multiple currencies, Best response dynamics, and Evolution of international currency 学科: F31 - Foreign Exchange, D51 - Exchange and Production Economies, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, and C78 - Bargaining Theory; Matching Theory
Creator: Chari, V. V. and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 308 Abstract:
We analyze the setting of monetary and nonmonetary policies in monetary unions. We show that in these unions a time inconsistency problem in monetary policy leads to a novel type of free-rider problem in the setting of nonmonetary policies, such as labor market policy, fiscal policy, and bank regulation. The free-rider problem leads the union’s members to pursue lax nonmonetary policies that induce the monetary authority to generate high inflation. The free-rider problem can be mitigated by imposing constraints on the nonmonetary policies, like unionwide rules on labor market policy, debt constraints on members’ fiscal policy, and unionwide regulation of banks. When there is no time inconsistency problem, there is no free-rider problem, and constraints on nonmonetary policies are unnecessary and possibly harmful.
关键词: Fixed exchange rates, Monetary regime, Maastricht Treaty, European Union, and Dollarization 学科: F33 - International Monetary Arrangements and Institutions, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy, F42 - International Policy Coordination and Transmission, E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination, F41 - Open Economy Macroeconomics, F30 - International Finance: General, and E58 - Central Banks and Their Policies
Creator: Siu, Henry E. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 390 Abstract:
I characterize time consistent equilibrium in an economy with price rigidity and an optimizing monetary authority operating under discretion. Firms have the option to increase their frequency of price change, at a cost, in response to higher inflation. Previous studies, which assume a constant degree of price rigidity across inflation regimes, find two time consistent equilibria—one with low inflation, the other with high inflation. In contrast, when price rigidity is endogenous, the high inflation equilibrium ceases to exist. Hence, time consistent equilibrium is unique. This result depends on two features of the analysis: (1) a plausible quantitative specification of the fixed cost of price change, and (2) the presence of an arbitrarily small cost of inflation that is independent of price rigidity.
关键词: Markov equilibrium, Expectation traps, Sticky prices, Multiple equilibria, Discretion, State dependent pricing, and Time consistency 学科: E31 - Price Level; Inflation; Deflation, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, and E52 - Monetary Policy
Creator: Ayres, João, Garcia, Márcio Gomes Pinto, Guillen, Diogo, and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 575 Abstract:
Brazil has had a long period of high inflation. It peaked around 100 percent per year in 1964, decreased until the first oil shock (1973), but accelerated again afterward, reaching levels above 100 percent on average between 1980 and 1994. This last period coincided with severe balance of payments problems and economic stagnation that followed the external debt crisis in the early 1980s. We show that the high-inflation period (1960-1994) was characterized by a combination of fiscal deficits, passive monetary policy, and constraints on debt financing. The transition to the low-inflation period (1995-2016) was characterized by improvements in all of these features, but it did not lead to significant improvements in economic growth. In addition, we document a strong positive correlation between inflation rates and seigniorage revenues, although inflation rates are relatively high for modest levels of seigniorage revenues. Finally, we discuss the role of the weak institutional framework surrounding the fiscal and monetary authorities and the role of monetary passiveness and inflation indexation in accounting for the unique features of inflation dynamics in Brazil.
关键词: Stabilization plans, Brazil's stagnation, Brazil's hyperinflation, Debt accounting, and Fiscal deficit 学科: H62 - National Deficit; Surplus, H63 - National Debt; Debt Management; Sovereign Debt, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, and E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
Creator: Buera, Francisco and Nicolini, Juan Pablo Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 580 Abstract:
In this chapter, we review the monetary and fiscal history of Argentina for the period 1960–2017, a time during which the country suffered several balance of payments crises, three periods of hyperinflation, two defaults on government debt, and three banking crises. All told, between 1969 and 1991, after several monetary reforms, thirteen zeros had been removed from its currency. We argue that all these events are the symptom of a recurrent problem: Argentina’s unsuccessful attempts to tame the fiscal deficit. An implication of our analysis is that the future economic evolution of Argentina depends greatly on its ability to develop institutions that guarantee that the government does not spend more than its genuine tax revenues over reasonable periods of time.
关键词: Macroeconomic history, Inflation, Fiscal and monetary interactions, Deficits, and Government budget constraint 学科: E31 - Price Level; Inflation; Deflation, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy, E50 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General, and N16 - Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: Latin America; Caribbean