PDP Number 4
An Incentive-Compatible Suggestion for Seigniorage Sharing with Dollarizing Countries
by Owen Humpage
Sixteen countries now give the U.S. dollar legal-tender status. Although dollarizing can help emerging-market countries gain monetary credibility and avoid currency crisis, many do not want to give up the seigniorage revenues associated with issuing their own fiat currency. This article offers a proposal for seignoirage sharing.
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PDP Number 3
Evaluating the Macroeconomic Effects of a Temporary Investment Tax Credit
by Paul Gomme
As part of a fiscal stimulus package, some members of Congress have recently proposed a temporary investment subsidy. This paper uses the neoclassical growth model to evaluate the likely macroeconomic effects of such a subsidy. The model predicts a 0.8 percentage point increase in output growth in the quarter that the policy is implemented. In subsequent quarters, the output growth effects are negligible. As the subsidy ends, output growth falls 1 percentage point before returning to its trend growth rate. While a permanent subsidy will lead to more capital deepening in the long term, it also represents a permanent fall in government revenues. Under a temporary subsidy, there is less capital deepening, but the decline in government revenues is likewise more modest.
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2001 2002 2003
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