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Title: The fiscal arithmetic of a dual currency regime

Author(s): Francesco Lippi

Publication Date: April 2020

Keyword(s): Chartalism, dual currency, monetary economy, Parallelcurrency, pure currency and scrip

Programme Area(s): International Macroeconomics and Finance

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.

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Bibliographic Reference

Lippi, F. 2020. 'The fiscal arithmetic of a dual currency regime'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14657