On the benefits of currency reform

R. Vijay Krishna and Oksana Leukhina

Journal of Economic Dynamics and Control, 2019, vol. 102, issue C, 81-95

Abstract: Money allows agents to achieve allocations that are not possible without it. However, currency in most economies is a uniform object, and there may be incentive compatible allocations that cannot be implemented with a uniform currency. We show that currency reform, i.e., changing the monetary base by replacing one currency with another, is a powerful tool that can enable a monetary authority to achieve a desired allocation. Our monetary mechanism with currency reform is anonymous and features a nonlinear exchange rate between currencies and a monotone value of money. These results help interpret the characteristics of currency reforms observed in practice.

Keywords: Currency reform; Monetary models (search for similar items in EconPapers)
JEL-codes: D82 E59 (search for similar items in EconPapers)
Date: 2019
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Working Paper: On the Benefits of Currency Reform (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:102:y:2019:i:c:p:81-95

DOI: 10.1016/j.jedc.2019.04.001

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