IDEAS home Printed from https://ideas.repec.org/a/kap/copoec/v16y2005i1p71-83.html
   My bibliography  Save this article

Credible Currency: A Constitutional Perspective

Author

Listed:
  • George Selgin
  • Lawrence White

Abstract

By contrast to private banks, public monetary authorities – central banks and currency boards – have limited credibility in making redemption or fixed-exchange-rate commitments. Their sovereign immunity obviates legal penalties for devaluing, and their monopoly status weakens reputational penalties. The softness of central bank promises invites speculative attack and currency crises. Privatization and decentralization of exchange-rate commitments provides a more credible currency by making redemption commitments legally enforceable and reputable. This contrast sheds light on (1) the breakdown of the classical gold standard and (2) the costs and benefits of dollarization. Copyright Springer Science+Business Media, Inc. 2005

Suggested Citation

  • George Selgin & Lawrence White, 2005. "Credible Currency: A Constitutional Perspective," Constitutional Political Economy, Springer, vol. 16(1), pages 71-83, January.
  • Handle: RePEc:kap:copoec:v:16:y:2005:i:1:p:71-83
    DOI: 10.1007/s10602-005-5853-z
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10602-005-5853-z
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s10602-005-5853-z?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," Research Department Publications 4170, Inter-American Development Bank, Research Department.
    2. Ricardo Hausmann & Michael Gavin & Carmen Pagés & Ernesto H. Stein, 1999. "Financial Turmoil and the Choice of Exchange Rate Regime," IDB Publications (Working Papers) 4128, Inter-American Development Bank.
    3. Velasco, A. & Chang, R., 1998. "The Asian Liquidity Crisis," Working Papers 98-27, C.V. Starr Center for Applied Economics, New York University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Respuestas a diez objeciones al patrón oro
      by Adrián Ravier in Punto de Vista Economico on 2012-05-23 18:06:50

    Citations

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


    Cited by:

    1. Maurizio Mistri, 2007. "Institutional changes and shifting ideas: a constitutional analysis of the Euro," Constitutional Political Economy, Springer, vol. 18(2), pages 107-126, June.
    2. Cutsinger, Bryan P., 2020. "On the feasibility of returning to the gold standard," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 88-97.
    3. Gunther Schnabl, 2012. "Monetary Policy Reform in a World of Central Banks," Global Financial Markets Working Paper Series 26-2012, Friedrich-Schiller-University Jena.
    4. Schnabl, Gunther, 2013. "The global move into the zero interest rate and high debt trap," Working Papers 121, University of Leipzig, Faculty of Economics and Management Science.
    5. Paniagua Pablo, 2016. "The Stability Properties of Monetary Constitutions," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 22(2), pages 113-138, December.
    6. Leigh A. Gardner, 2014. "The rise and fall of sterling in Liberia, 1847–1943," Economic History Review, Economic History Society, vol. 67(4), pages 1089-1112, November.
    7. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.
    8. George Selgin, 2015. "Law, Legislation, and the Gold Standard," Cato Journal, Cato Journal, Cato Institute, vol. 35(2), pages 251-272, Spring/Su.

    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. Jane Sneddon Little & Giovanni P. Olivei, 1999. "Why the interest in reforming the International Monetary System?," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 53-84.
    2. Eduardo Fernández-Arias & Ricardo Hausmann, 1999. "International Initiatives to Bring Stability to Financial Integration," Research Department Publications 4174, Inter-American Development Bank, Research Department.
    3. Andrés VELASCO, 2000. "Exchange-Rate Policies For Developing Countries: What Have We Learned? What Do We Still Not Know?," G-24 Discussion Papers 5, United Nations Conference on Trade and Development.
    4. Eduardo Fernández-Arias & Ricardo Hausmann, 1999. "Iniciativas internacionales para darle estabilidad a la integración financiera," Research Department Publications 4175, Inter-American Development Bank, Research Department.
    5. di Giovanni, Julian & Shambaugh, Jay C., 2008. "The impact of foreign interest rates on the economy: The role of the exchange rate regime," Journal of International Economics, Elsevier, vol. 74(2), pages 341-361, March.
    6. Jean-Pierre Allegret & Mohamed Ayadi & Leila Haouaoui, 2007. "Volatility of Shocks and Degree of Exchange Rate Flexibility," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 54(3), pages 271-301, September.
    7. Levy Yeyati, Eduardo & Sturzenegger, Federico & Reggio, Iliana, 2010. "On the endogeneity of exchange rate regimes," European Economic Review, Elsevier, vol. 54(5), pages 659-677, July.
    8. Velimir Šonje, 2000. "Exchange Rate and Output in the Aftermath of the Great Depression and During the Transition Period in Central Europe," Working Papers 4, The Croatian National Bank, Croatia.
    9. Guillermo Ortiz, 2000. "How should monetary policymakers react to the new challenges of global economic integration: commentary," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 255-276.
    10. Magud, Nicolas E., 2010. "Currency mismatch, openness and exchange rate regime choice," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 68-89, March.
    11. Barry Eichengreen & Michael D. Bordo, 2003. "Crises now and then: what lessons from the last era of financial globalization?," Chapters, in: Paul Mizen (ed.), Monetary History, Exchange Rates and Financial Markets, chapter 3, Edward Elgar Publishing.
    12. Eduardo Fernández-Arias & Ricardo Hausmann, 2000. "The Redesign of the International Financial Architecture from a Latin American Perspective: Who Pays the Bill?," Research Department Publications 4245, Inter-American Development Bank, Research Department.
    13. Carlos da Silva & Matías Vernengo, 2008. "The Decline of the Exchange Rate Pass-Through in Brazil: Explaining the "Fear of Floating"," International Journal of Political Economy, Taylor & Francis Journals, vol. 37(4), pages 64-79.
    14. Salazar-Xirinachs, Jose M., 2002. "Proliferation of sub-Regional Trade Agreements in the Americas: an assessment of key analytical and policy issues," Journal of Asian Economics, Elsevier, vol. 13(2), pages 181-212.
    15. De la Torre, Augusto & Schmukler, Sergio, 2007. "Emerging Capital Markets and Globalization: The Latin American Experience," IDB Publications (Books), Inter-American Development Bank, number 349.
    16. Tatiana Didier & Sergio L Schmukler, 2014. "Debt Markets in Emerging Economies: Major Trends," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 56(2), pages 200-228, June.
    17. Esteban Jadresic & Paul R. Masson & Paolo Mauro, 2019. "Exchange Rate Regimes of Developing Countries: Global Context and Individual Choices," World Scientific Book Chapters, in: Macroeconomic Modelling and Monetary and Exchange Rate Regimes, chapter 5, pages 143-193, World Scientific Publishing Co. Pte. Ltd..
    18. Robert Chang & Andres Velasco, 2004. "Endogenous dollarization, expectations, and equilibrium monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    19. Barry Eichengreen and Carlos Arteta., 2000. "Banking Crises in Emerging Markets: Presumptions and Evidence," Center for International and Development Economics Research (CIDER) Working Papers C00-115, University of California at Berkeley.
    20. Pablo Druck & Eduardo Morón & Ernesto Stein, 2001. "The Twin Risks in the Dollarization Debate: Country and Devaluation Risks," CEMA Working Papers: Serie Documentos de Trabajo. 198, Universidad del CEMA.

    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:kap:copoec:v:16:y:2005:i:1:p:71-83. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.