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Simple fiscal arithmetic of a dual currency regime

Francesco Lippi

No 1908, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

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. We present a simple model to analyze the workings of equilibria where the parallel currency is valued in equilibrium and discuss its consequence for real allocations in terms of a simple equivalent fiscal policy.

Pages: 13
Date: 2019, Revised 2019-05
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