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Simple fiscal arithmetic of a dual currency regime

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  • Francesco Lippi

    (LUISS University and EIEF)

Abstract

There are several real world examples of local governments that, faced with budget problems, circulate a fiat token in parallel to the official currency. We present a simple model to analyze the workings of equilibria where the parallel currency is valued in equilibrium and discuss its consequence for real allocations in terms of a simple equivalent fiscal policy.

Suggested Citation

  • Francesco Lippi, 2019. "Simple fiscal arithmetic of a dual currency regime," EIEF Working Papers Series 1908, Einaudi Institute for Economics and Finance (EIEF), revised May 2019.
    • Handle: RePEc:eie:wpaper:1908
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    References listed on IDEAS

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    1. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    2. Starr, Ross M, 1974. "The Price of Money in a Pure Exchange Monetary Economy with Taxation," Econometrica, Econometric Society, vol. 42(1), pages 45-54, January.
    3. Knapp, Georg Friedrich, 1924. "The State Theory of Money," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number knapp1924.
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