Policy Discussion Papers
Providing you with in-depth analysis of monetary and financial policy.
- No. 4
- 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. (PDF)
- No. 3
- 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. (PDF)