This paper applies a two-country framework that allows for currency substitution in an environment in which policymakers optimally vary interest rates in light of utility-based objectives, one country pegs the value of its currency to the other nation's currency, and government revenue is generated via explicit taxes and seigniorage. The analysis illustrates the roles that currency substitution, currency preferences, and efficiency of tax systems play in contributing to the likelihood of a "run" on one nation's currency. We explore how these factors interact to influence the probability of a currency crisis in the country that fixes its exchange rate.
Abstract. As international financial systems are becoming political tools to manipulate the exchange of money for good, cryptocurrency, and its potential to avoid the international banking system becomes more popular. Thus, the question becomes what happens to the nation's monitory system if cryptocurrency's electronic payment transaction and system replace the current system? Most nation's central bank controls the financial systems, which affect institutions, rules, regulations, and laws of the land that affect this system. Robinson (2016) suggests money as a commodity in the national scope. International banks use BIC for transferring money with each other. Cryptocurrency, so far, does not need BIC to transfer money from one location to another. Bitcoin, the system is a peer-to-peer internet currency allowing verified, and decentralized transfers of value between individuals and businesses. This article is a short introduction discussing the legacy money and cryptocurrency and the potential of cryptocurrency as a new currency and its possible implications.Keywords. Cryptocurrency, Blockchain, Currency, Money, Bitcoin, BIC, SWIFT.JEL. O30, O35, O36.
Most schemes of complementary currencies developed in the last 50 years are based on the "money as a means of exchange" concept, which means exchange of individual agents based on their indi-vidual needs and offers. The individual person or is an actor in a network and by establishing a market it is possible to exchange goods and services. Mutual Credit systems LETS or Timebanks support mostly this market case and many of them limit common activities to the sole operation of the system itself. Therefore, community currencies today are often currencies operating within a community but not necessary for the community. The case of a commons is mostly not recognized as a completely different kind of exchange where needs of a whole group have to be satisfied through offers of individuals and offers of the whole (commons) have to be shared among the indi-vidual members. Such an exchange asks for different features from a community currency. This was the starting point of a project in Zurich, Switzerland to develop a more suitable and effective cur-rency on the commons idea. It is the needs and tasks of the community, the public (community) goods and common tasks which are the core and drivers of the currency. As a secondary element the traditional individual market-based system complements this common layer and strengthens its impact. Therefore, it could be seen as a two tiers model. The paper describes basics, premises and functions of the idea including some historical background and more specifically the case of Wörgel in Austria which has some interesting aspects still not widely taken into consideration. The main features of the district currency model include intended and controllable circulation, demo-cratic decision of spending and budgeting and a commons-based value system. The currency was developed along a case study in a housing co-operative in Zurich. Experiences with the planning district-currency-game give some important hints for the feasibility and the functioning of such an improved currency model and the open questions remaining to be answered.
The breakdown of the Argentine currency board in early 2002 produced a number of obituaries that often quite rashly declared the country's monetary constitution since 1991 the main responsible for its recent near-catastrophic economic collapse. Contrary to such rather one-sided negative ascriptions to the currency board system, the intention of this paper is to give a comprehensive and balanced description of the currency board model in theory, as well as to name its functioning conditions under today's economic and political conditions prevailing in developing and transforming countries. It will become clear that the success of a currency board in terms of lasting stabilization of an economy not only depends on its initial design (e.g. the choice of the anchor currency, of the exchange rate, the legal and institutional fixings) but also on an ongoing process of economic and institutional reform that extends from a general macroeconomic and especially public sector streamlining to banking sector reforms, product and labour market deregulation, and to a general realignment of the economy towards exportorientation and international competitiveness. The extent to which these reforms are tackled and completed decides over the degree to which the economy is able to absorb real shocks without incurring high economic and social adaptation costs, hence over the degree to which a country is able to benefit from the currency board's strengths without falling victim to its potentially severe weaknesses. Along with some basic reflections about the concept and motivation of modern currency boards, sections 1-3 give a brief overview over the historical background of the currency board idea as well as of its implementation. Section 4 focuses on the constitutional elements of a currency board, while section 5 provides the core of the discussion of pros and cons of currency boards, depicting the system's strengths and weaknesses as well as the conditions under which they materialize. Section 6 will discuss under which circumstances a currency board is a good choice for a country, and ask whether less strict stabilization policies might be able to deliver the hoped-for benefits less costly. Some problems related to the questions of duration and termination of currency boards are addressed in section 7. Finally, section 8 will give a brief exposition of the idea of dual currency boards as a theoretical extension of the currency board model which promises to eliminate one of the biggest immanent threats to a currency board.
Abstract. Complementary currency has been a trending issue. This is because the complementary currency can reduce people's dependency on the government in serving the currency as a medium of exchange. However, many studies neglected the role of idle gold. Aceh is one province of Indonesia that reserves the right of special autonomy to implement Sharia. Aceh, being renowned for its fertility in the cultivation of some agricultural products such as coffee, tobacco, and palm oil, has become a strategic trade center. Aceh is also equally rich in gold mines, with the approximate result of five tons a year. This research attempts to design a model of complementary currency based on physical gold in Aceh. This study uses unstructured interviews with scholars, leaders, business people, and the government. The result reveals that stakeholders agree with the gold complementary currency, support and willing to recommend it. Besides, this model is believed to be beneficial. However, the most challenging factor is the support from the government which is essential to develop this gold currency model.Keywords: Complementary Currency, Aceh Economy, Gold-Based Money, Islamic Currency. Abstrak. Mata uang komplementer (complementary currency) menjadi isu yang masih terus menjadi pembahasan. Hal ini karena mata uang komplementer dapat mengurangi ketergantungan terhadap pemerintah dalam melayani kebutuhan mata uang sebagai media pertukaran. Mata uang komplementer, termasuk yang berbasis emas, dapat meningkatkan ketahanan masyarakat terhadap krisis moneter. Namun demikian, kajian tentang hal ini masih jarang, terutama tentang peranan emas yang menganggur (idle gold). Aceh merupakan satu provinsi di Indonesia yang memiliki hak otonomi khusus untuk menerapkan syariat Islam. Penelitian ini mencoba merekomendasikan model mata uang komplementer berdasarkan emas, untuk diimplementasikan di Aceh. Penelitian dilakukan dengan wawancara tidak terstruktur dengan stakeholders dari ulama, pemimpin masyarakat, pelaku bisnis, dan pemerintah. Hasilnya menunjukkan bahwa stakeholders setuju, mendukung, dan merekomendasikan penggunaan mata uang komplementer di Aceh. Selain itu, model ini dipercaya dapat bermanfaat bagi perekonomian, kehidupan sosial, dan penerapan nilai Islam serta persaidaraan. Namun demikian, tantangan yang paling utama adalah dukungan pemerintah dan keterlibatannya dalam pengembangan dan implementasi model ini.Kata kunci: Complementary Currency, Aceh Economy, Gold-Based Money, Islamic Currency
Currency wars are featured by competitive currency devaluations. Countries endeavor to reach the bottom of their currency prices in relation to other exchange rates. It becomes competitive when one country follows suit after another country and most of the time, the trading partner, has exacted a devaluation in their currencies. There are various negative effects that riddle the markets of the home economy and that of the foreign markets. Multinational corporations and also the local small and medium size enterprises are the most affected entities next to the citizenry. This study endeavors to provide an in-depth view on the particular situation that Japan has dealt with over decades. Due to the severe and constant deflationary pressure that started since the early 90s Japan has undertaken several policies to prop up the economy. A broad explanation is given about the ample topic of currency devaluation. This analysis stems from an economics topic such as monetary and fiscal policies. But the details explained are elemental to understand the implications of the international business in the core industries in the Japanese market. This is a qualitative research based on discourse analysis. The mode of analysis is particularly helpful in collecting and organizing the data with the most precise manner. Several interviews were recorded, coded and categorized accordingly. Data was collected through a time period spanning over 9 months. The results underlined a deficiency in the application of policies to help the Japanese economy. The various interventions exacted by the Bank of Japan have been rather short lived. The case of Japan still extends yonder as the new policies' results application is yet to be seen. The currency devaluation that the authorities in Japan have applied have been of no avail. The economy is still lagging in the numbers. The industrial sectors of core production for the economy such as the automakers, electronics and banking have dealt with extreme situations under stark uncertainty. The case of Japan is but one situation that is replicated throughout other countries around the world. As one of the few extant research studies on currency devaluation undertaken via a qualitative approach based on discourse analysis, this study offers a very different angle. This analysis differs from usual research on this area which is quantitative and supported by other parallel research methods. This study follows a call on a more pragmatic understanding of what the situation has been for the particular case of Japan. Discourse analysis has allowed for a very hands-on experience into the very core of the international business by gathering the thoughts of the industry participants and that of the central bankers as well. This study aims at finding the link of government policy application and engineering and how that affects the operations in cross-border business making. Economic policy affects the entire country structure that allows for it to advance and prosper. That is why, this study has taken a particular aim at currency devaluation, as the operations beyond the political borders is what brings a corporation to become a globally sensible, sustainable, profitable and viable entity. Thus, their dealings are affected by how the exchange rate, stability and instability, is monitored and impacted by the governments.
The US dollar has been volatile and falling again and again in recent decades as well as recent years, and for many observers, it is going to be broken sooner or later. The central importance of the dollar is due to the fact that it is not just a currency for the US. Over half of all dollar bills in circulation are held outside of the US borders, and almost half of the US Treasury bonds are held as reserves by foreign central banks. The US dollar is supposed to be the anchor that stabilizes the global currency market. Instead, today it is a major source of instability. In the back ground, the US fiscal deficits have been running high again under Bush administration, once up to almost 3% of US GDP. And current account deficit is set to about 7% in 2005 and more volatility is widely expected. The situation is very challenging for the central banks of Japan, China, Korea, Taiwan and Singapore which collectively hold about US$2.8 trillion worth of US Treasury bonds as part of their reserves. The moment that they reduce their purchases, the value of the dollar slips. Yet, the more they buy, the more they are exposed to a potential free fall of the US dollar. China has been blamed, not only by US congressmen who are understandably not very familiar with either the complicated currency issues or the domestic politics in any other country, but also many economists or business strategists. It was said that it was all because RMB did not reevaluate, as the source of this "global imbalance" and currency instability. How much revaluation of RMB would remove the US deficits of $700 billions, or at least the US-China trade deficits $200 billions (including Hong Kong)? 500% or 1000%? Of cause no body asked for that kind of magnitude now. Normally smart people say 30-50%, with the unsaid intention to blame-then-suggest again another 30-50% after some initial moves, then the third, the fourth. This seems not really new phenomena at all. It has been all so familiar before and since the Nixon shock in early 70s', and in 80s' when there was the Plaza Accord. The convenient targets to blame were the gold standard, the Dutch Mark, the Japanese Yen. Now it is turn for Chinese reminbi. So the question is what are the real causes of the global imbalance and currency instability? In this short paper, we first take a look at what is really going on with the Chinese economy and trade balance, and then try to identify sources of the current imbalance , and then, as a concluding remark, think again the possibilities to reform the global currency system.
Entitled "Damage, Fear, and Transformation: International Currency Systems and Postwar Japan's Currency Policies," my dissertation sheds light on how economic damage/loss arouses fears of politicians, monetary authorities, economic experts, and business groups and how those fears can propel changes in the economic system. This can be seen through a case study of Japanese currency policy since 1945. We are accustomed to the paradigm that regards economic changes as largely the consequence of people's proactive and voluntary actions as embodied in entrepreneurship, challenge spirit, and profit-seeking, but my research shows that another large factor affecting the economic system is reactive actions driven by fear of losing accumulated wealth. Although researchers have examined the immense impact that damages and fear can cause to an economic system, they treated such damage and fear not as persistent factors but as temporary factors that emerged only during or after the time of emergency when the preexisting system became dysfunctional. In contrast, a proactive entrepreneurial spirit has been thought by many as having always been the engine of economic change from ancient times to the present. The reason the role of damage/loss and fear has been seen in such a limited way is that earlier studies mostly focused on realized economic damage, and not on the potential scale of unrealized economic damage and people's fear of it. This fear of potential economic damage has exerted a persistent influence on economic systems even in times of prosperity. What is potential economic damage? Potential economic damage expands in tandem with economic growth because we come to have more things to lose as we attain larger economic scale and property (scale of accumulation, transaction, etc.). And why does potential damage/loss consistently affect an economic system? As economic scale expands, the preexisting economic system gradually becomes unsuitable for the overgrown scale of the economy. Since such an unsustainable state destabilizes the containment of potential loss that has been growing along with economic expansion, the fear of losing accumulated wealth becomes increasingly widespread, leading both decision-makers and businesspeople to seek the fortification or transformation of the preexisting system. Demonstrating such a relationship, the dissertation argues that damage/loss and fear were not intermittent external causes, but consistent prime movers of economic change. To support the argument, the dissertation focuses on potential and realized losses related to currency, and their influence on the currency system, especially in Japan. Because a country's currency rate affects its products' overseas price and because trade had high importance for Japan, fear of economic damages that would result from a destabilization of the currency system and foreign exchange market attained massive proportions in Japan. Therefore, through the case of Japanese currency policy, we can relatively easily discern the interrelation between fear of potential/realized economic damage and systemic change. Specifically, the interrelation can be found in the following phases where potential economic damage and fear of it propelled Japanese politicians, monetary authorities, economic experts, and the business community to fortify the fixed exchange rate system until the early 1970s, replace it with the floating exchange rate system between 1971 and 1973, and fortify the floating exchange rate system since 1974. To test this argument I have examined a large number of primary sources such as documents issued by the officials of the Japanese government and the central bank, as well as newspapers and economic magazines issued at each phase. Such extensive archival work confirmed that people's fear of potential economic damage/loss played a large role in defending or altering the preexisting currency system.
"Leading objects of these pamphlets: I. A government circulating medium, founded upon the property of the country. II. Repeal of £5,000,000 of taxes. III. Gradual and honest liquidation of the national debt." ; Mode of access: Internet.
Official report of proceedings of the Illinois Democratic Convention, called for June 5, 1895, as edited by C.R. Tuttle. ; Preservation photocopy. ; Mode of access: Internet.
The traditional Mundellian criterion, which implicitly assumes commitment to monetary policy, is that countries with similar shocks should form unions. Without such commitment a new criterion emerges: countries with dissimilar temptation shocks, namely those that exacerbate time inconsistency problems, should form unions. Critical to this new criterion is the idea that monetary policy is benevolent in that it takes into account the interests of all the countries in the union. When countries have dissimilar temptation shocks, benevolent unions can help overcome the time inconsistency problems that individual countries face. Existing unions can strictly gain by admitting new members with more severe time inconsistency problems, because policy in the expanded union is less sensitive to the temptation shocks of members of the existing union. ; The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
For more than a decade, China has a policy of managing its currency exchange rate (RMB) to limit its appreciation against other currencies like U.S dollar. This policy has been subjected to many criticisms from United States' lawmakers as currency manipulation. The U.S. argues that China is gaining an advantage of export and attracting direct foreign investment at the expense of other countries including the United State. The claim also has included that China's manipulation causes U.S. trade deficit as well as high rate of unemployment. Meanwhile, China's policy makers argue that its policy of exchange rate is a mechanism tool to enhance the development of the country and attaining market growth to make China rich and powerful. This research paper underlines the root of this argument and how china's currency policy has affected both economics of U.S. and China. Many economists have emphasized on the appreciation of RMB as an important factor to attain the trade balance. However, this research argues that the appreciation is not going to matter. Pressure has been put on Obama's Administration to push China to appreciate its currency and to designate China as a "currency manipulator". Several Bills have been introduced to discuss this issue.From a legal perspective, two entities could tackle this issue. They are the World Trade Organization (WTO) and the International Monetary Fund (IMF). However, IMF lack legitimacy and leverage and WTO has no jurisdiction over the exchange rate. So, none of these entities could handle the currency issue. Therefore, this paper analyzes some possible solutions such as Omnibus Act, tariffs, import quotas and forming new legislation. Where, it concludes that the best solution could be via forming a new international agency.
