The Tax-Foundation Theory of Fiat Money

Dror Goldberg ()

No 2009-5, Working Papers from Bar-Ilan University, Department of Economics

Abstract: A government can promote the use of an object as the general medium of exchange by accepting it in tax payments. I prove this old claim in a dynamic model and compare the mechanism to convertibility. The government can often keep its favourite money in circulation even while increasing its quantity and thus causing it to decrease in value. This opens the door for an inflationary policy. Most successful fiat moneys have been acceptable for tax payments, typically due to legal tender laws. Numerous historical failures of fiat moneys are consistent with the theory.

Date: 2009-04
New Economics Papers: this item is included in nep-acc, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www2.biu.ac.il/soc/ec/wp/2009-05.pdf Working paper (application/pdf)

Related works:
Journal Article: The tax-foundation theory of fiat money (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:biu:wpaper:2009-5

Access Statistics for this paper

More papers in Working Papers from Bar-Ilan University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Department of Economics ().