The fiscal arithmetic of a dual currency regime

Francesco Lippi

No 14657, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Parallelcurrency; Dual currency; Monetary economy; Pure currency; Scrip; Chartalism (search for similar items in EconPapers)
JEL-codes: E3 E5 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-mac and nep-mon
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Journal Article: The Fiscal Arithmetic of a Dual Currency Regime (2021)
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