IDEAS home Printed from https://ideas.repec.org/a/bla/coecpo/v12y1994i2p46-54.html
   My bibliography  Save this article

Stabilizing The Expected Price Level In A Bfh Payments System

Author

Listed:
  • W. WILLIAM WOOLSEY

Abstract

The Black‐Fama‐Hall system of free banking promises improved macroeconomic performance through the use of a common unit of account defined in terms of a bundle of goods and services and indirectly convertible means of payment. This paper shows how BFH can operate when the actual market price of the dollar‐defining bundle is measured only periodically. The proposed version of BFH would require banks to calculate the amount of redemption medium (gold or securities) needed to redeem money using the subsequent measurement of the bundle's market price. The procedure in effect would make checks, banknotes, and token coins of given face value directly convertible into redemption medium of equal market value and into an index futures contract on the bundle's market price. The paper explains how the system would tend to stabilize the expected price of the dollar‐defining bundle and uses a dynamic stochastic model to illustrate the consequences for the actual price level, real income, and interest rates.

Suggested Citation

  • W. William Woolsey, 1994. "Stabilizing The Expected Price Level In A Bfh Payments System," Contemporary Economic Policy, Western Economic Association International, vol. 12(2), pages 46-54, April.
    • Handle: RePEc:bla:coecpo:v:12:y:1994:i:2:p:46-54
    DOI: 10.1111/j.1465-7287.1994.tb00422.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1465-7287.1994.tb00422.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1465-7287.1994.tb00422.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Leland B. Yeager, 1983. "Stable Money and Free-Market Currencies," Cato Journal, Cato Journal, Cato Institute, vol. 3(1), pages 305-333, Spring.
    2. Robert E. Hall, 1982. "Introduction to "Inflation: Causes and Effects"," NBER Chapters, in: Inflation: Causes and Effects, pages 1-10, National Bureau of Economic Research, Inc.
    3. Leland B. Yeager & Robert L. Greenfield, 1989. "Can Monetary Disequilibrium Be Eliminated?," Cato Journal, Cato Journal, Cato Institute, vol. 9(2), pages 405-428, Fall.
    4. Sumner, Scott B, 1990. "The Forerunners of "New Monetary Economics" Proposals to Stabilize the Unit of Account," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(1), pages 109-118, February.
    5. Glasner,David, 2005. "Free Banking and Monetary Reform," Cambridge Books, Cambridge University Press, number 9780521022514.
    6. Greenfield, Robert L & Yeager, Leland B, 1983. "A Laissez-Faire Approach to Monetary Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 302-315, August.
    7. Sumner, Scott, 1989. "Using Futures Instrument Prices to Target Nominal Income," Bulletin of Economic Research, Wiley Blackwell, vol. 41(2), pages 157-162, April.
    8. Robert E. Hall, 1982. "Inflation: Causes and Effects," NBER Books, National Bureau of Economic Research, Inc, number hall82-1, July.
    9. Greenfield, Robert L & Yeager, Leland B, 1986. "Competitive Payments Systems: Comment," American Economic Review, American Economic Association, vol. 76(4), pages 848-849, September.
    10. Yeager, Leland B, 1985. "Deregulation and Monetary Reform," American Economic Review, American Economic Association, vol. 75(2), pages 103-107, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:dau:papers:123456789/11496 is not listed on IDEAS
    2. James A. Dorn, 2010. "Editor's Note," Cato Journal, Cato Journal, Cato Institute, vol. 30(3), Fall.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Malte Krueger, 2012. "Money: A Market Microstructure Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(6), pages 1245-1258, September.
    2. Bennett T. McCallum, 2003. "Monetary Policy in Economies with Little or No Money," NBER Working Papers 9838, National Bureau of Economic Research, Inc.
    3. Sumner Scott, 2006. "Let a Thousand Models Bloom: The Advantages of Making the FOMC a Truly 'Open Market'," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-27, October.
    4. W. William Woolsey, 1992. "The Search for Macroeconomic Stability: Comment on Sumner," Cato Journal, Cato Journal, Cato Institute, vol. 12(2), pages 475-485, Fall.
    5. Cesarano, Filippo, 1995. "The New Monetary Economics and the theory of money," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 445-455, May.
    6. Sumner, Scott, 2015. "Nominal GDP futures targeting," Journal of Financial Stability, Elsevier, vol. 17(C), pages 65-75.
    7. Visser, H., 1989. "The monetary order," Serie Research Memoranda 0003, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    8. J. Aschheim & G.S. Tavlas, 1994. "Nominal anchors for monetary policy: a doctrinal analysis," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 47(191), pages 469-494.
    9. repec:dau:papers:123456789/11496 is not listed on IDEAS
    10. David Cronin, 2017. "Indirect Convertibility, Equity-Based Banking and Financial Stability," Economic Affairs, Wiley Blackwell, vol. 37(3), pages 357-364, October.
    11. Luigi Ventimiglia, 2012. "Commodity markets," Chapters, in: Jan Toporowski & Jo Michell (ed.), Handbook of Critical Issues in Finance, chapter 8, pages i-ii, Edward Elgar Publishing.
    12. Bordo, Michael D., 1986. "Explorations in monetary history: A survey of the literature," Explorations in Economic History, Elsevier, vol. 23(4), pages 339-415, October.
    13. Gundlach, Erich, 1987. "Währungsreform und wirtschaftliche Entwicklung: Westdeutschland 1948," Kiel Working Papers 286, Kiel Institute for the World Economy (IfW Kiel).
    14. J. S. Ferris & J. A. Galbraith, 2003. "Indirect convertibility as a money rule for inflation targeting," Applied Financial Economics, Taylor & Francis Journals, vol. 13(10), pages 753-761.
    15. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    16. Eric Tremolada Álvarez (editor), 2015. "La arquitectura del ordenamiento internacional y su desarrollo en materia económica," Books, Universidad Externado de Colombia, Facultad de Derecho, edition 1, number 785, October.
    17. Michael D. Bordo & Andrew T. Levin, 2017. "Central Bank Digital Currency and the Future of Monetary Policy," NBER Working Papers 23711, National Bureau of Economic Research, Inc.
    18. Richard C.K. Burdekin & Kris James Mitchener & Marc D. Weidenmier, 2012. "Irving Fisher and Price-Level Targeting in Austria: Was Silver the Answer?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(4), pages 733-750, June.
    19. Gerald Caprio & Michael Dooley & Danny Leipziger & Carl Walsh, 1996. "The lender of last resort function under a currency board: The case of Argentina," Open Economies Review, Springer, vol. 7(1), pages 625-650, March.
    20. repec:hal:spmain:info:hdl:2441/6982 is not listed on IDEAS
    21. Hendrickson, Joshua R., 2022. "Commodity money, free banking, and nominal income targeting: Lessons for monetary policy reform," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 462-477.
    22. Jürgen Von Hagen & Ingo Fender, 1998. "Central Bank Policy in a More Perfect Financial System," Open Economies Review, Springer, vol. 9(1), pages 493-532, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:coecpo:v:12:y:1994:i:2:p:46-54. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/weaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.