In 1790, a U.S. paper dollar was widely held in disrepute (something shoddy was not 'worth a Continental'). By 1879, a U.S. paper dollar had become 'as good as gold.' These outcomes emerged from how the U.S. federal government financed three wars: the American Revolution, the War of 1812, and...

We provide an analytical narrative of the political and economic causes and consequences of institutional changes in the Argentine banking system. We devote most of our attention to the privatization of the provincial banks. Our story differs from the prevailing wisdom in its stress on the key...

In the classic analysis of smuggling importers choose the optimal mix of legal and illegal trade, given trade taxes and the technology of detection. This paper introduces an inconvertible currency in the framework, so that illegal trade is valued at a rate higher than the (fixed) official...

This note extends the theory of the revenue maximizing rate of monetary growth to the case of a temporary suspension of convertibility. It also suggests a methodology for the interpretation of monetary behavior during historical periods of inconvertibility. First we analyze the case of a...

Argentina's economic crisis has strong similarities with previous crises stretching back to the nineteenth century. A common thread runs through all these crises: the interaction of a weak, undisciplined, or corruptible banking sector, and some other group of conspirators from the public or...

This paper analyzes regimes of currency inconvertibility in the frame-work of a simple general equilibrium model where an officially-traded good,a smuggled good and a non-traded good are produced and consumed by residents,who hold domestic and foreign currency in their portfolios. It is shown...

This paper analyzes the macroeconomics of currency inconvertibility, building on the role of relative prices in a portfolio balance model. The relationship between black markets for foreign exchange and smuggling is first analyzed from the perspective of an individual importer. According to the...