Monetization of Public Goods Provision: A possible solution for the free-rider problem
We consider a new method of public goods provision: monetization. The government makes a particular public good the specie of money and commits itself to buy the public good at a predetermined nominal price and adjust money supply so that the ratio between the public good reserve and money supply equals a predetermined reserve ratio. In a two-country model, in which one country issues international currency and the other issues domestic currency, we show that if the government that issues the international currency adopts a monetization policy, it can attain both the optimal level of public goods provision and equal cost sharing for the public goods provision between the two countries by choosing the nominal price of the public good and the reserve ratio appropriately. In this case, the international free-rider problem is completely resolved.
|Date of creation:||Jun 2008|
|Date of revision:|
|Contact details of provider:|| Postal: 11th floor, Annex, Ministry of Economy, Trade and Industry (METI) 1-3-1, Kasumigaseki Chiyoda-ku, Tokyo, 100-8901|
Web page: http://www.rieti.go.jp/
More information through EDIRC
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.:
- Robert E. Lucas Jr. & Nancy L. Stokey, 1984.
"Money and Interest in Cash-In-Advance Economy,"
628, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Lucas, Robert Jr. & Stokey, Nancy L., 1983.
"Optimal fiscal and monetary policy in an economy without capital,"
Journal of Monetary Economics,
Elsevier, vol. 12(1), pages 55-93.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Stavins, Robert & Barrett, Scott & Aldy, Joseph, 2003. "13 + 1: A Comparison of Global Climate Change Policy Architectures," Discussion Papers dp-03-26, Resources For the Future.
- KOBAYASHI Keiichiro, 2008. "Emissions Standard System: A monetary regime for provision of global public goods," Discussion papers 08004, Research Institute of Economy, Trade and Industry (RIETI).
- Milton Friedman, 1951. "Commodity-Reserve Currency," Journal of Political Economy, University of Chicago Press, vol. 59, pages 203.
- U.Sankar, 2008.
"Global Public Goods,"
2008-028, Madras School of Economics,Chennai,India.
- Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-20, April.
- Barro, Robert J, 1979. "Money and the Price Level under the Gold Standard," Economic Journal, Royal Economic Society, vol. 89(353), pages 13-33, March.
When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:08019. 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: (NUKATANI Sorahiko)
If references are entirely missing, you can add them using this form.