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In this paper we determine the optimal combination of taxes on money, consumption and income in transaction technology models. We show that the optimal policy does not tax money, regardless of whether the government can use the income tax, the consumption tax, or the two taxes jointly. These results are at odds with recent literature. We argue that the reason for this divergence is an inappropriate specification of the transaction technology adopted in the literature.

We document that, across households, the money consumption ratio increases with age and decreases with consumption, and that there has been a large increase in the money consumption ratio during the recent era of very low interest rates. We construct an overlapping generations (OLG) model of money holdings for transaction purposes subject to age (older households use more money), cohort (younger generations are exposed to better transaction technology), and time effects (nominal interest rates affect money holdings). We use the model to measure the role of these different mechanisms in shaping money holdings in recent times. We use our measurements to assess the interest rate elasticity of money demand and to revisit the question of what the welfare cost of inflation is (which depends on how the government uses the windfall gains from the inflation tax). We find that cohort effects are quite important, accounting for half of the increase in money holdings with age. This in turn implies that our measure of the interest rate elasticity of money is -0.6, on the high end of those in the literature. The cost of inflation is lower by one-third in the model and, as a result, lower than previously estimated in the literature that does not account for the secular financial innovation.

This is a post-peer-review, pre-copyedit version of a book review published in the journal, Contemporary Political Theory. The definitive publisher-authenticated version CHERNILO, D., 2016. Book review: The sacredness of the person: a new genealogy of human rights. Contemporary Political Theory, 15 (3), pp. e41 - e44, DOI:10.1057/cpt.2015.48 is available online at: http://dx.doi.org/10.1057/cpt.2015.48

This is a review of the book Hans Joas, Georgetown University Press, Washington DC, 2013, xi+217pp., ISBN: 978-1589019690. This is a post-peer-review, pre-copyedit version of an article published in Contemporary Political Theory. The definitive publisher-authenticated version CHERNILO, D., 2016. Review: the sacredness of the person: a new genealogy of human rights. Contemporary Political Theory, 15 (3), e41–e44 is available online at: http://dx.doi.org/10.1057/cpt.2015.48

This is a review of the book Hans Joas, Georgetown University Press, Washington DC, 2013, xi+217pp., ISBN: 978-1589019690. This is a post-peer-review, pre-copyedit version of an article published in Contemporary Political Theory. The definitive publisher-authenticated version CHERNILO, D., 2016. Review: the sacredness of the person: a new genealogy of
human rights. Contemporary Political Theory, 15 (3), e41–e44 is available online at: http://dx.doi.org/10.1057/cpt.2015.48

In der öffentlichen Diskussion gibt es immer wieder Wissenschaftler, die für eine Abschaffung des Bargelds plädieren. Ihrer Ansicht nach würde ein solcher Schritt die faktische Zinsuntergrenze von null beseitigen und damit der Geldpolitik weiteren Handlungsspielraum eröffnen. Zudem erschwere die Abschaffung des Bargelds anonyme Transaktionen und helfe im Kampf gegen Schwarzarbeit und Steuerhinterziehung. Sind die vorgebrachten Argumente überzeugend? Aus Sicht von Carl-Ludwig Thiele, Deutsche Bundesbank, sollte das Bargeld auch in Zukunft als Zahlungsmittel erhalten bleiben. Die Bevölkerung schätze das Bargeld als anonymes Zahlungsmittel, das es ihnen erlaubt, ihre Privatsphäre zu schützen und ihr Recht auf informationelle Selbstbestimmung auszuüben. Auch nach Meinung von Dirk Niepelt, Studienzentrum Gerzensee und Universität Bern, würde die Abschaffung des Bargelds zu einer dramatischen Einschränkung der Privatsphäre führen. Malte Krüger, Hochschule Aschaffenburg, und Franz Seitz, Ostbayerische Technische Hochschule Weiden, sehen zudem, dass die Auswirkungen einer solchen Maßnahme begrenzt wären, wenn nur in einem Währungsraum Bargeld abgeschafft würde. Robert Halver, Baader Bank, Frankfurt am Main, findet Transaktionen per Kartenzahlung oftmals langwierig und sieht die Datensicherheit in der bargeldlosen Zahlungswelt nicht genügend gewährleistet. Und auch Albrecht F. Michler, Heinrich-Heine-Universität Düsseldorf, findet eine staatlich verordnete Abschaffung des Bargelds wenig überzeugend, zumal die Kosten den zusätzlichen Nutzen überschreiten könnten und der Verzicht auf Bargeld keine ökonomischen Probleme lösen würde.

The Covid-19 crisis has lead to a reduction in the demand and supply of sectors that produce goods that need social interaction to be produced or consumed. We interpret the Covid-19 shock as a shock that reduces utility stemming from 'social' goods in a two-sector economy with incomplete markets. We compare the advantages of lump-sum transfers versus a credit policy. For the same path of government debt, transfers are preferable when debt limits are tight, whereas credit policy is preferable when they are slack. A credit policy has the advantage of targeting fiscal resources toward agents that matter most for stabilizing demand. We illustrate this result with a calibrated model. We discuss various shortcomings and possible extensions to the model.

There is much in our increasingly digitized economies to suggest that the use of cash should fall. However, in almost all countries, it is constant or rising with a few notable exceptions. Sweden, in particular, displays a divergent development. In this paper, we explore the drivers behind this development. We use a data set consisting of 129 developed and developing countries and an extensive set of possible explanatory variables to estimate panel regressions for cash demand. In line with earlier studies, we find that economic development, demography, and the interest rate are important factors. A new finding is that our estimations point to a negative relationship between cash and corruption, and between cash and trust in government and financial institutions. However, this is not enough to fully explain the divergent development in Sweden. We therefore also discuss some recent events and policy measures in Sweden that seem to have accelerated the decline in cash during the last decade.

This paper examines how money demand induced real balance effects contribute to the determination of the price level, as suggested by Patinkin (1949,1965), and if they affect conditions for local equilibrium uniqueness and stability. There exists a unique price level sequence that is consistent with an equilibrium under interest rate policy, only if beginning-of-period money enters the utility function. Real money can then serve as a state variable, implying that interest rate setting must be passive for unique, stable, and non-oscillatory equilibrium sequences. When end-ofperiod money provides utility, an equilibrium is consistent with infinitely many price level sequences, and equilibrium uniqueness requires an active interest rate setting. The stability results are, in general, independent of the magnitude of real balance effects, and apply also when prices are sticky. In contrast, under a constant money growth policy, equilibrium sequences are (likely to be) locally stable and unique for all model variants. Keywords: Real balance effects ; predetermined money ; price level determination ; real determinacy ; monetary policy rules

An integrated stochastic macroeconomic model of transition economy at the early stage of reforms with optimising representative risk averse agents is constructed.The equilibrium growth rate of the economy, real asset returns, domestic money demand, and expected inflation rate are determined as functions of the exogenous risks in the economy.The main issue addressed are: domestic money demand, currency substitution ratio, expected rate of inflation, real asset returns, the equilibrium growth rate of the economy as well as government ability to control these variables.Analysis of the model finds that the equilibrium growth rate of the economy is not independent on the monetary and fiscal policies but can be affected by the government through its ability to fix the real cost of capital for the firm, expenditure and monetary policy parameters.

This paper examines the experience of Sweden with government notes and private bank notes to determine how well the Swedish experience corresponds to that of Canada and the United States. Sweden is important to study because it has had government notes in circulation for more than 350 years, and it had government notes before private bank notes. Several differences between the experience of Sweden and that of Canada and the U.S. emerge. (i) Swedish bank notes were safe; in some cases, those of Canada and the U.S. were not. (ii) At certain times, Swedish government notes were not safe; government notes in Canada and the U.S. always were. (iii) Swedish private bank notes were a uniform currency without government intervention. Uniformity required government intervention in Canada and the U.S. (iv) Private notes and government notes coexisted in all three countries until governments took actions to drive private bank notes out of circulation. Using the experience of the three countries, the paper concludes that fiduciary digital currencies will likewise not be perfectly safe without government intervention. Further, the introduction of government digital currency will not drive out existing private digital currencies nor will it preclude private digital currencies from entering the market. Government intervention likely will be required for private and government digital currencies to be a uniform currency.

This paper studies the period in Canada when both private bank notes and governmentissued notes (Dominion notes) were simultaneously in circulation. Because both of these notes shared many of the characteristics of today's digital currencies, the experience with these notes can be used to draw lessons about how digital currencies might perform. The paper begins with a brief historical review of how these notes came into existence and of the regulations regarding their issuance. It examines historical evidence on how desirable bank notes were as media of exchange by examining how well they functioned with respect to ease of transacting, counterfeiting, safety, scarcity, and par exchange (a uniform currency). It then examines whether the introduction of government-issued notes improved how bank notes functioned as media of exchange. It finds that they did not. Improvements in the functioning of bank notes were due to changes in government regulation. Using the Canadian experience and that of the United States, the paper concludes that privately issued digital currencies will not be perfectly safe without government intervention, governmentissued digital currency will not drive out existing private digital currencies, and government intervention will be required for privately issued and government-issued digital currencies to be a uniform currency.

Beginning in 1864, in the United States notes of national banks were the predominant medium of exchange. Each national bank issued its own notes. E-money shares many of the characteristics of these bank notes. This paper describes some lessons relevant to emoney from the U.S. experience with national bank notes. It examines historical evidence on how well the bank notes - a privately-issued currency system with multiple issuers - functioned with respect to ease of transacting, counterfeiting, safety, overissuance and par exchange (a uniform currency). It finds that bank notes made transacting easier and were not subject to overissuance. National bank notes were perfectly safe because they were insured by the federal government. Further, national bank notes were a uniform currency. Notes of different banks traded at par with each other and with greenbacks. This paper describes the mechanism that was put in place to achieve uniformity. The U.S. experience with national bank notes suggests that a privately-issued e-money system can operate efficiently but will require government intervention, regulation, and supervision to minimize counterfeiting, promote safety and provide the mechanism necessary for different media of exchange to exchange at par with each other.