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National Money of Account, with a Second National Money or Local Monies as Means of Payment: A Way of Finessing the Zero Interest Rate Bound

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  • Stephen J. DAVIES

    (Kobe University)

Abstract

This paper shows how negative interest rates can be implemented \ at much less cost than under alternative proposals \ by separation of the account and means of payment roles of money \ i.e. by having these roles performed by different moneys. Such separation has been far from unusual in history, however unnatural it may seem to those whose experience is of model non-separated monetary systems. One possibility discussed is that the means of payment role of cash could be provided by local currencies rather than a national currency.

Suggested Citation

  • Stephen J. DAVIES, 2005. "National Money of Account, with a Second National Money or Local Monies as Means of Payment: A Way of Finessing the Zero Interest Rate Bound," Kobe Economic & Business Review, Research Institute for Economics & Business Administration, Kobe University, vol. 49, pages 69-91, February.
  • Handle: RePEc:kob:review:feb2005::v:49:p:69-91
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    Keywords

    Negative interest rates; Money of account; Local currencies;

    JEL classification:

    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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