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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' ...
Journal Article
The analytics of German monetary unification
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
Journal Article
Dollarization in Argentina
Several countries are seriously considering the abandonment of their currency and its formal replacement with the U.S. dollar. Since 1991, Argentina has backed its currency with 100 percent reserves and successfully pegged it to the dollar. In doing so, it has already grappled with many issues that confront would-be adopters of the dollar. Moving to full-fledged dollarization might offer a solution to recurring crises that are partly driven by expectations that Argentina might abandon its peg.
Journal Article
What We Learn from a Sovereign Debt Restructuring in France in 1721
A debt is a promise to perform a certain action (make a payment) in the future. A default is a failure to perform the action when the time comes to do so. If performance of the action were always in my interest, the promise to perform it would be superfluous. When we promise to do something, it is precisely because we may well not want to do it. Debt usually takes the form of a contract, which courts can enforce. But sovereign debt (debt issued by governments) is harder to enforce, because governments aren?t easily constrained by courts. How can sovereign governments make promises and be ...
Journal Article
Poor hand or poor play? the rise and fall of inflation in the U.S.
Inflation in the U.S. rose in the 1970s and fell in the 1980s and 1990s. The conventional story attributes this pattern to changes in monetary policy. Policymakers made errors and learned from them. This article presents the story and existing alternatives that emphasize instead changes beyond the Fed's control. The author also reviews the recent empirical literature on the role played by changes in luck versus changes in policy and finds substantial evidence for both.
Journal Article
Lessons from the history of money
This article looks at eight centuries of monetary history and asks: What happened and what have we learned? Money evolved from commodity-based to purely fiduciary, and in the trial-and-error process, governments learned some basic truths about price stability and the management of a sound currency.
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.
Journal Article
Following the yellow brick road: how the United States adopted the gold standard
The United States, with some difficulty, adopted the gold standard in the late nineteenth century, thus pegging the dollar to the pound sterling and other currencies. Some have argued it was mistake, others that it was inevitable. This article recounts the historical background and uses a model to shed light on the choices faced by policymakers of the time.
Journal Article
The recession of 1937 - a cautionary tale
This article reviews the competing explanations offered for the recession of 1937, which interrupted the recovery from the Great Depression. One explanation, increases in labor costs due to the New Deal's industrial policies, fails to account for the full extent of the downturn and for the ensuing recovery. In contrast, monetary policy and fiscal policy seem to capture the downturn?although not its precise timing?and the recovery.