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Journal Article
An alternative measure of inflation
The author proposes an alternative measure of inflation that captures the intuition behind the use of "core" measures. Inflation is modeled as an unobserved factor affecting the components of an aggregate price index (including food and energy). The common component, estimated using Kalman filtering, resembles usual measures of core inflation; its extrapolation can be used to improve performance in forecasting core inflation.
Working Paper
An Institutional Investor in 18th-Century Britain
Queen Anne’s Bounty was a corporation created in 1704 to redistribute income within the Anglican clergy. Structurally a saver needing a liquid asset, the corporation pursued a conservative strategy of investing in the dominant form of government debt, adapting as the market changed. It was involved in the South Sea Bubble but only made losses and steered clear from corporate equity and bonds thereafter.
Working Paper
The case of the undying debt
The French government currently honors a very unusual debt contract: an annuity that was issued in 1738 and currently yields ?1.20 per year. I tell the story of this unique debt, which serves as an anecdotal but symbolic summary of French public finances since the 18th century.
Working Paper
Chronicles of a deflation unforetold
Suppose the nominal money supply could be cut literally overnight by, say, 20%. What would happen to prices, wages, output? The answer can be found in 1720s France, where just such an experiment was carried out, repeatedly. Prices adjusted instantaneously and fully on one market only, that for foreign exchange. Prices on other markets (such as commodities) as well as prices of manufactured goods and industrial wages fell slowly, over many months, and not by the full amount of the nominal reduction. Coincidentally or not, the industrial sector (as represented by manufacturing of woolen cloths) ...
Working Paper
Government equity and money: John Law’s system in 1720 France
John Law?s System was a radical restructuring of French public finances, carried out from 1716 to 1720. It involved on the one hand a conversion of the existing French public debt into something like government equity, on the other hand the replacement of commodity money with fiat money. For strategic reasons, Law supported the equity at too high a level, resulting in uncontrolled money creation. The System ended with the recreation of a public debt at, surprisingly, the same level as before.
Newsletter
Americans are not saving: should we worry?
Working Paper
Early Public Banks
Publicly owned or commissioned banks were common in Europe from the 15th century. This survey argues that while the early public banks were characterized by great experimentation in their design, a common goal was to create a liquid and reliable monetary asset in environments where such assets were rare or unavailable. The success of these banks was, however, never guaranteed, and even well-run banks could become unstable over time as their success made them susceptible to fiscal exploitation. The popularization of bearer notes in the 18th century broadened the user base for the public banks' ...
Working Paper
Expenditures, Earnings, and Net Worth of the Comédie Française, 1723–1793
I study the expenditures of the Comédie française from 1759 to 1793 and the company’s debt from 1723 to 1793. Expenditures were well controlled and changes in venues account for their increase over time. The debt, however, was less controlled, because of the company’s partnership structure and the incentives it created for actors to compensate with debt any shortfall in income due to low tickets sales or delayed payments from the king. I analyze the debt instruments used and the social background of the lenders. I also study the total income of individual actors and the earnings profile ...
Working Paper
Britain’s Debt Restructuring, 1717–22
Britain’s debt was nil in 1688 and 60% of GDP in 1717. From 1717 to 1722 the debt was restructured, including through the South Sea operation of 1720. I discuss the reasons for the restructuring and the tensions it revealed between taxpayers and creditors. The South Sea bubble turned the operation into an ex-post Ponzi scheme and redistributed among creditors, from late to early entrants, and from creditors to taxpayers. Parliament intervened to redistribute among creditors (but far less than was feasible) and, very reluctantly, from taxpayers to creditors. Commitment to honor the debt was ...
Journal Article
Avoiding a meltdown: managing the value of small change
To prevent a shortage of small change, the U.S. Department of the Treasury recently prohibited the melting and exportation of pennies and other coins. The problem arises because pennies and nickels are made of inappropriately expensive material, and there is or soon will be a profit to be made from transferring their content to alternative uses. The author provides a historical context for the problem of small change and discusses possible remedies