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On Optimal Currency Substitution Policy and Public Finance

In: Economic Policy in Theory and Practice

Author

Listed:
  • Zvi Hercowitz
  • Efraim Sadka

Abstract

One of the means of raising revenue available to a government is the inflation tax on domestic money balances. The demand for these balances and the revenue from inflation depend, among other things, on the tax rate itself and on the degree of substitutability between domestic money and alternative assets, which are referred to in the paper as foreign exchange. (However, the discussion can be interpreted as involving money substitutes in general.)

Suggested Citation

  • Zvi Hercowitz & Efraim Sadka, 1987. "On Optimal Currency Substitution Policy and Public Finance," Palgrave Macmillan Books, in: Assaf Razin & Efraim Sadka (ed.), Economic Policy in Theory and Practice, chapter 4, pages 147-169, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-18584-9_4
    DOI: 10.1007/978-1-349-18584-9_4
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    Citations

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    Cited by:

    1. Mr. Guillermo Calvo & Mr. Carlos A. Végh Gramont, 1992. "Currency Substitution in Developing Countries: An Introduction," IMF Working Papers 1992/040, International Monetary Fund.
    2. Vegh, Carlos A., 1995. "Inflationary finance and currency substitution in a public finance framework," Journal of International Money and Finance, Elsevier, vol. 14(5), pages 679-693, October.
    3. Piersanti, Giovanni, 2012. "The Macroeconomic Theory of Exchange Rate Crises," OUP Catalogue, Oxford University Press, number 9780199653126.
    4. Alberto Giovannini & Bart Turtelboom, 1992. "Currency Substitution," NBER Working Papers 4232, National Bureau of Economic Research, Inc.
    5. Fridman Alla & Verbetsky Aleksey, 2001. "Currency Substitution in Russia," EERC Working Paper Series 01-05e, EERC Research Network, Russia and CIS.

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