Government finance with currency substitution

• 成果类型: Article
• 署名作者: Sibert, A; Liu, LH
• 署名单位: University of London; Birkbeck University London; Centre for Economic Policy Research - UK; University of Kansas
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(97)00023-8
• 发表日期: 1998
• 页码: 155-172
• 关键词: currency substitution; Seigniorage

摘要

We analyze seigniorage in an overlapping-generations model where a friction induces a precautionary demand for a weaker currency. The friction, which is modeled as a transactions cost, is viewed as an inverse measure of currency substitutability. Governments finance spending with costly income taxation or seigniorage. We show that if governments act independently, money growth is suboptimally low if currencies are sufficiently substitutable and too high otherwise. If money growth is suboptimally low, increasing substitutability lowers it further. However, since greater substitutability is associated with smaller real costs of exchanging money, welfare need not fall. (C) 1998 Elsevier Science BN.