Interest-Bearing Currency

John Whittaker

Oxford Economic Papers, 1999, vol. 51, issue 3, 476-86

Abstract: This paper analyzes proposals to pay interest to holders of currency. It is argued that, if this is achieved by introducing a new currency which appreciates relative to the existing currency, then this new currency will not be a convenient transactions medium unless it takes over from the old currency as the unit of account. But, if this occurs, it will defeat the purpose of the scheme because the interest is relative to the old unit of account and the new currency will no longer be interest-bearing. Copyright 1999 by Royal Economic Society.

Date: 1999
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