Maximizing Seignorage Revenue During Temporary Suspensions of Convertibility: A Note

Michael Bordo and Angela Redish

No 4024, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This note extends the theory of the revenue maximizing rate of monetary growth to the case of a temporary suspension of convertibility. It also suggests a methodology for the interpretation of monetary behavior during historical periods of inconvertibility. First we analyze the case of a government with a monopoly over currency issue. The government maximizes seignorage revenue by generating an inflation, but the terminal condition of a return to convertibility implies that the price level must drop at the point of suspension of convertibility, so that there is no discontinuity at the date of resumption. We then consider the behavior of a private banking system whose monetary liabilities are temporarily inconvertible. The model is then used to interpret monetary behaviour during the suspension of convertibility by U.S. banks in 1837/8.

Date: 1992-03
Note: DAE ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as Oxford Economic Papers, , Vol 45., pp. 157-168 (1993)

Downloads: (external link)
http://www.nber.org/papers/w4024.pdf (application/pdf)

Related works:
Journal Article: Maximizing Seignorage Revenue during Temporary Suspensions of Convertibility: A Note (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:4024

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4024

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().