Details

Related name

• National Bureau of Economic Research [Browse]
• Redish, Angela [Browse]

Series

• Working Paper Series (National Bureau of Economic Research) no. w4024. [More in this series]
• NBER working paper series no. w4024

Summary note

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.

Notes

March 1992.

Source of description

Print version record

Other title(s)

Maximizing Seignorage Revenue During Temporary Suspensions of Convertibility

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