Maximizing Seignorage Revenue during Temporary Suspensions of Convertibility: A Note
This note extends the theory of the revenue maximizing rate of monetary growth to the case of a temporary suspension of convertibility. It also suggests a methodology for the interpretation of monetary behavior during historical periods of inconvertibility. First we analyze the case of a government with a monopoly over currency issue. The government maximizes seignorage revenue by generating an inflation, but the terminal condition of a return to convertibility implies that the price level must drop at the point of suspension of convertibility, so that there is no discontinuity at the date of resumption. We then consider the behavior of a private banking system whose monetary liabilities are temporarily inconvertible. Copyright 1993 by Royal Economic Society.
Volume (Year): 45 (1993)
Issue (Month): 1 (January)
|Contact details of provider:|| Postal: |
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Friedman, Milton, 1971. "Government Revenue from Inflation," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 846-56, July-Aug..
- N. Gregory Mankiw, 1987.
"The Optimal Collection of Seigniorage: Theory and Evidence,"
NBER Working Papers
2270, National Bureau of Economic Research, Inc.
- Mankiw, N. Gregory, 1987. "The optimal collection of seigniorage : Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 327-341, September.
- Smith, Gregor W & Smith, R Todd, 1990.
"Stochastic Process Switching and the Return to Gold, 1925,"
Royal Economic Society, vol. 100(399), pages 164-75, March.
- Gregor W. Smith & R. Todd Smith, 1988. "Stochastic Process Switching and the Return to Gold, 1925," Working Papers 723, Queen's University, Department of Economics.
- Auernheimer, Leonardo, 1983. "The Revenue-Maximizing Inflation Rate and the Treatment of the Transition to Equilibrium," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 368-76, August.
- Michael D. Bordo & Finn E. Kydland, 1992.
"The gold standard as a rule,"
9205, Federal Reserve Bank of Cleveland.
- Calomiris, Charles W, 1988.
"Price and Exchange Rate Determination during the Greenback Suspension,"
Oxford Economic Papers,
Oxford University Press, vol. 40(4), pages 719-50, December.
- Calomiris, Charles W, 1994. "Price and Exchange Rate Determination during the Greenback Suspension," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 344, April.
- Auernheimer, Leonardo, 1974. "The Honest Government's Guide to the Revenue from the Creation of Money," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 598-606, May/June.
- Michael D. Bordo & Eugene N. White, 1991. "British and French Finance During the Napoleonic Wars," NBER Working Papers 3517, National Bureau of Economic Research, Inc.
- Klein, Benjamin, 1974. "The Competitive Supply of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(4), pages 423-53, November.
- Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 39-57, January.
- Bordo, Michael D. & White, Eugene N., 1991. "A Tale of Two Currencies: British and French Finance During the Napoleonic Wars," The Journal of Economic History, Cambridge University Press, vol. 51(02), pages 303-316, June.
When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:45:y:1993:i:1:p:157-68. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.