IDEAS home Printed from https://ideas.repec.org/a/bla/ecaffa/v34y2014i3p370-378.html
   My bibliography  Save this article

Debt Erosion and the Market Process

Author

Listed:
  • Alexander William Salter

Abstract

This paper explores the effects of debt erosion on the market process. Debt erosion is the attempt by government to lower the real value of its debt through the creation of unexpected inflation. In addition to the costs recognised by most economists, debt erosion through unexpected inflation can impair the price system's ability to coordinate exchange activity and can result in costly capital misallocations. This is because the creation of unexpected inflation implies disequilibrium in the money market. To avoid the harm from such monetary shocks, this paper suggests a separation between money and state, enshrined in an explicit rule at the constitutional level.

Suggested Citation

  • Alexander William Salter, 2014. "Debt Erosion and the Market Process," Economic Affairs, Wiley Blackwell, vol. 34(3), pages 370-378, October.
    • Handle: RePEc:bla:ecaffa:v:34:y:2014:i:3:p:370-378
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/ecaf.12092
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Peter Ordeshook, 1992. "Constitutional stability," Constitutional Political Economy, Springer, vol. 3(2), pages 137-175, March.
    2. Horwitz, Steven, 2011. "Do we need a distinct monetary constitution?," Journal of Economic Behavior & Organization, Elsevier, vol. 80(2), pages 331-338.
    3. George A. Selgin & Lawrence H. White, 1994. "How Would the Invisible Hand Handle Money?," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1718-1749, December.
    4. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
    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. Peter J. Boettke & Alexander W. Salter & Daniel J. Smith, 2018. "Money as meta-rule: Buchanan’s constitutional economics as a foundation for monetary stability," Public Choice, Springer, vol. 176(3), pages 529-555, September.

    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. Alexander Salter, 2014. "Is there a self-enforcing monetary constitution?," Constitutional Political Economy, Springer, vol. 25(3), pages 280-300, September.
    2. Peter J. Boettke & Alexander W. Salter & Daniel J. Smith, 2018. "Money as meta-rule: Buchanan’s constitutional economics as a foundation for monetary stability," Public Choice, Springer, vol. 176(3), pages 529-555, September.
    3. Salter, Alexander William & Tarko, Vlad, 2017. "Polycentric banking and macroeconomic stability," Business and Politics, Cambridge University Press, vol. 19(2), pages 365-395, June.
    4. Bryan P. Cutsinger, 2021. "Forced savings and political malinvestment: an application of steve horwitz’s microfoundations and macroeconomics," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 34(2), pages 311-322, June.
    5. repec:jpe:journl:1042 is not listed on IDEAS
    6. Paul Lewis & Richard E. Wagner, 2017. "New Austrian macro theory: A call for inquiry," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 30(1), pages 1-18, March.
    7. Hendrickson, Joshua R. & Salter, Alexander W., 2018. "Going beyond monetary constitutions: The congruence of money and finance," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 22-28.
    8. Cachanosky, Nicolás & Salter, Alexander W. & Savanti, Ignacio, 2022. "Can dollarization constrain a populist leader? The case of Rafael Correa in Ecuador," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 430-442.
    9. Salter, Alexander William & Young, Andrew T., 2018. "A theory of self-enforcing monetary constitutions with reference to the Suffolk System, 1825–1858," Journal of Economic Behavior & Organization, Elsevier, vol. 156(C), pages 13-22.
    10. Golub, Alexander (Голуб, Александр), 2018. "Methodological Issues of Assessing Investment Risks in Projects Weakening the Dependence of the Russian Economy on Natural Resources and Providing a Transition to Low-Carbon Development [Методологи," Working Papers 071802, Russian Presidential Academy of National Economy and Public Administration.
    11. Tan Wang & Tony S. Wirjanto, 2016. "Risk Aversion, Uncertainty, Unemployment Insurance Benefit and Duration of "Wait" Unemployment," Annals of Economics and Finance, Society for AEF, vol. 17(1), pages 1-34, May.
    12. Seokbeom Kwon & Jan Youtie & Alan Porter & Nils Newman, 2024. "How does regulatory uncertainty shape the innovation process? Evidence from the case of nanomedicine," The Journal of Technology Transfer, Springer, vol. 49(1), pages 262-302, February.
    13. Paxson, Christina H & Sicherman, Nachum, 1996. "The Dynamics of Dual Job Holding and Job Mobility," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 357-393, July.
    14. Jason P. Brown & Dayton M. Lambert & Raymond J. G. M. Florax, 2013. "The Birth, Death, and Persistence of Firms: Creative Destruction and the Spatial Distribution of U.S. Manufacturing Establishments, 2000–2006," Economic Geography, Clark University, vol. 89(3), pages 203-226, July.
    15. Arman Avadikyan & Patrick Llerena, 2009. "Socio-technical transition processes: A real option based reasoning," Working Papers of BETA 2009-21, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    16. Per Botolf Maurseth, 2005. "Lovely but dangerous: The impact of patent citations on patent renewal," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 14(5), pages 351-374.
    17. Morgenroth, Edgar & FitzGerald, John & FitzGerald, John, 2006. "Summary and Conclusions," Book Chapters, in: Morgenroth, Edgar (ed.),Ex-Ante Evaluation of the Investment Priorities for the National Development Plan 2007-2013, chapter 24, pages 317-333, Economic and Social Research Institute (ESRI).
      • Baker, Terence J. & FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Summary and Conclusions," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 12, pages 339-352, Economic and Social Research Institute (ESRI).
    18. Gentier Antoine, 2013. "3 Comments on “An Austrian Defense of the Euro”," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 19(1), pages 29-40, December.
    19. repec:bla:germec:v:4:y:2003:i::p:389-408 is not listed on IDEAS
    20. Sharon Belenzon & Victor Manuel Bennett & Andrea Patacconi, 2019. "Flexible Production and Entry: Institutional, Technological, and Organizational Determinants," Strategy Science, INFORMS, vol. 4(3), pages 193-216, September.
    21. Insley, Margaret, 2017. "Resource extraction with a carbon tax and regime switching prices: Exercising your options," Energy Economics, Elsevier, vol. 67(C), pages 1-16.
    22. Peter J. Boettke & Liya Palagashvili, 2015. "Taming Leviathan," Supreme Court Economic Review, University of Chicago Press, vol. 23(1), pages 279-303.

    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:ecaffa:v:34:y:2014:i:3:p:370-378. 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: http://www.blackwellpublishing.com/journal.asp?ref=0265-0665 .

    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.