The Fiscal Arithmetic of a Dual Currency Regime

Francesco Lippi

Journal of Money, Credit and Banking, 2021, vol. 53, issue 7, 1887-1897

Abstract: There are several real‐world examples of local governments that faced with budget problems circulate a fiat token in parallel to the official currency. A well‐known case is the Argentinian “Patacon,” printed by the province of Buenos Aires during the crisis of 2001. We present a simple model to analyze the workings of monetary equilibria where the parallel currency is valued in equilibrium and discuss its consequence for real allocations in terms of an equivalent fiscal policy. We briefly discuss different model specifications and their fit to alternative historic experiences.

Date: 2021
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https://doi.org/10.1111/jmcb.12796

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Working Paper: The fiscal arithmetic of a dual currency regime (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:53:y:2021:i:7:p:1887-1897

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