Do You Mind if I Round?: Eliminating the Penny A Structural Analysis
For decades, economists have debated the price-rounding effect on the economy if the penny is eliminated. Deviating from the bulk of the literature, which typically considers case-studies with empirical simulations and data manipulation, I evaluate a multiple household, deterministic model with endogenous currency production. My findings suggest that the elimination of the smallest unit of currency has a “nickel-and-dime” effect on the economy, regardless of the rounding policy. This structural model is constructed and calibrated to emulate a “worst-case scenario”, but it is also robust to the empirical results in the literature.
|Date of creation:||Oct 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (785) 864-3501
Fax: (785) 864-5270
Web page: http://www2.ku.edu/~kuwpaper/
More information through EDIRC
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.:
- Belongia, Michael T. & Ireland, Peter N., 2014.
"The Barnett critique after three decades: A New Keynesian analysis,"
Journal of Econometrics,
Elsevier, vol. 183(1), pages 5-21.
- Michael T. Belongia & Peter N. Ireland, 2010. "The Barnett Critique After Three Decades: A New Keynesian Analysis," Boston College Working Papers in Economics 736, Boston College Department of Economics.
- Michael T. Belongia & Peter N. Ireland, 2012. "The Barnett Critique After Three Decades: A New Keynesian Analysis," NBER Working Papers 17885, National Bureau of Economic Research, Inc.
- Weber, Christian E, 2000. ""Rule-of-Thumb" Consumption, Intertemporal Substitution, and Risk Aversion," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(4), pages 497-502, October.
- Barnett, William A., 1978. "The user cost of money," Economics Letters, Elsevier, vol. 1(2), pages 145-149.
- N. Gregory Mankiw, 1999.
"The Savers-Spenders Theory of Fiscal Policy,"
Harvard Institute of Economic Research Working Papers
1888, Harvard - Institute of Economic Research.
- Peter N. Ireland, 2011.
"The Macroeconomic Effects on Interest on Reserves,"
Boston College Working Papers in Economics
772, Boston College Department of Economics.
- Raymond E. Lombra, 2001. "Eliminating the Penny from the U.S. Coinage System: An Economic Analysis," Eastern Economic Journal, Eastern Economic Association, vol. 27(4), pages 433-442, Fall.
- Robert Whaples, 2007. "Time to Eliminate the Penny from the U.S. Coinage System: New Evidence," Eastern Economic Journal, Eastern Economic Association, vol. 33(1), pages 139-146, Winter.
When requesting a correction, please mention this item's handle: RePEc:kan:wpaper:201309. 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: (Jianbo Zhang)
If references are entirely missing, you can add them using this form.