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Samuelson's consumption-loan model with country-specific fiat monies

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  • John H. Kareken
  • Neil Wallace

Abstract

In this paper, we examine various exchange rate regimes, paying particular attention to what difference the monetary-fiscal policy choices of governments make. The exchange rate may be market-determined or fixed, and if fixed, either cooperatively or by one government alone. Further, capital controls may or may not apply. Our most important result, quite general, we believe, is that absent capital controls the equilibrium exchange rate of the floating rate regime is indeterminate. It makes no sense to advocate floating rates and unfettered international borrowing and lending.

Suggested Citation

  • John H. Kareken & Neil Wallace, 1978. "Samuelson's consumption-loan model with country-specific fiat monies," Staff Report 24, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:24
    as

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    References listed on IDEAS

    as
    1. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66(6), pages 467-467.
    2. Kareken, John & Wallace, Neil, 1977. "Portfolio autarky: A welfare analysis," Journal of International Economics, Elsevier, vol. 7(1), pages 19-43, February.
    3. Neil Wallace, 1977. "On simplifying the theory of fiat money," Staff Report 22, Federal Reserve Bank of Minneapolis.
    4. Gale, David, 1974. "The trade imbalance story," Journal of International Economics, Elsevier, vol. 4(2), pages 119-137, May.
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    Cited by:

    1. Hwang, Chiun-Lin, 1989. "Optimal monetary policy in an open macroeconomic model with rational expectation," ISU General Staff Papers 1989010108000010197, Iowa State University, Department of Economics.
    2. Khalfaoui, Rabeh & Padhan, Hemachandra & Tiwari, Aviral Kumar & Hammoudeh, Shawkat, 2020. "Understanding the time-frequency dynamics of money demand, oil prices and macroeconomic variables: The case of India," Resources Policy, Elsevier, vol. 68(C).
    3. Guillermo Ortiz, 1983. "Dollarization in Mexico: Causes and Consequences," NBER Chapters, in: Financial Policies and the World Capital Market: The Problem of Latin American Countries, pages 71-106, National Bureau of Economic Research, Inc.
    4. John Bryant, 1978. "Transactions demand for money," Staff Report 38, Federal Reserve Bank of Minneapolis.
    5. David A. Hsieh, 1982. "International Risk Sharing and the Choice of Exchange-Rate Regime," NBER Working Papers 0842, National Bureau of Economic Research, Inc.
    6. Thomas J. Sargent, 1981. "\"Dollarization,\" seignorage, and the demand for money," Working Papers 170, Federal Reserve Bank of Minneapolis.
    7. Benjamin Eden, 1980. "On the Use of Local Currency When Less Inflationary Currencies are Available: An Overlapping Generations Model," UCLA Economics Working Papers 187, UCLA Department of Economics.

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