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The Fiscal Arithmetic of a Dual Currency Regime

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  • FRANCESCO LIPPI
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. A well‐known case is the Argentinian “Patacon,” printed by the province of Buenos Aires during the crisis of 2001. We present a simple model to analyze the workings of monetary equilibria where the parallel currency is valued in equilibrium and discuss its consequence for real allocations in terms of an equivalent fiscal policy. We briefly discuss different model specifications and their fit to alternative historic experiences.

Suggested Citation

  • Francesco Lippi, 2021. "The Fiscal Arithmetic of a Dual Currency Regime," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(7), pages 1887-1897, October.
    • Handle: RePEc:wly:jmoncb:v:53:y:2021:i:7:p:1887-1897
    DOI: 10.1111/jmcb.12796
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    References listed on IDEAS

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    Cited by:

    1. Ionela Munteanu & Flavius Valentin Jakubowicz, 2022. "A Bibliometric Analysis of Scientific Accounting Studies Concerning Fiscal Topics," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 920-926, Decembrie.
    2. Juan E. Castañeda & Sebastian Damrich & Pedro Schwartz, 2024. "Parallel Currencies under Free Floating Exchange Rates: A Model Setting Out the Conditions for Stable Currency Competition," Economies, MDPI, vol. 12(10), pages 1-20, September.

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    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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