Under a proposal by Robert L. Greenfield and Leland B. Yeager (1989), the value of currency is tied to the value of a defined basket of goods by indirect convertibility: the note-issuing bank offers to redeem its currency for sufficient gold to buy the basket in the market. The authors find that...

The Stability Pact -- intended to make EMU governments run prudent budgets -- is losing its credibility. This article asks the question: what will happen if national debts start to rise again and some governments then have difficulty borrowing? It suggests that there will be calls for bailout,...

This paper analyzes proposals to pay interest to holders of currency. It is argued that, if this is achieved by introducing a new currency which appreciates relative to the existing currency, then this new currency will not be a convenient transactions medium unless it takes over from the old...

In the context of a standard model of optimal monetary policy, I argue that expectations should be treated as adaptive rather than rational. This argument is justified by considering the rational expectations equilibrium of this model as the limit point of a sequence in which agents...

In the context of a standard model of optimal monetary policy, I argue that expectations should be treated as adaptive rather than rational. This argument is justified by considering the rational expectations equilibrium of this model as the limit point of a sequence in which agents...

It is known that, if disequilibrium trade occurs according to the assumptions of the Hahn Process, Walrasian stability is achieved by means of falling target utilities. This paper shows, by means of an example in a pure exchange economy, that the assumptions of the Hahn Process are not...

Germany is a reluctant supporter of the EU funds which are being used in the ‘bailout’ of Ireland, and it insists on strict ‘austerity’ conditions, concerned about risk and moral hazard. However, through its central bank, Germany is lending €325bn (December 2010) to other central banks...

The public debt of Greece to foreign governments, including debt to the EU/IMF loan facility and debt through the eurosystem, rose from €47.8bn to €180.5bn between January 2010 and September 2011. €17.1bn of the rise in eurosystem debt was due to an 86% increase in the Greek issue of euro...

This paper challenges the logical consistency of the Barro and Gordon (1983) type of model of policy credibility, in which agents have 'trigger strategy' expectations of policy. It is shown that optimal policy is to 'cheat' by announcing low inflation whilst pursuing high inflation. This implies...