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Secondary currencies and high inflation. Implications for monetary theory and policy

Auerbach, P. and Davison, G. (1992) Secondary currencies and high inflation. Implications for monetary theory and policy. CEP discussion paper, 58. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: 58

Abstract

Existing economic models treat secondary currencies as damaging during inflationary period. Such an approach emerges from the perspective of a ''normal'' economy with a single, relatively stable currency. During periods of high inflation, however, this perspective is deceptive, with the widespread emergence of commodity ''monies'' as substitutes for the primary currency. In the economic dislocation associated with high inflation, the use of secondary currencies associated with high inflation, the use of secondary currencies facilitates the preservation of real economic activity. Furthermore, governmental acquiescence to the public''s use of a secondary currencies adds to the credibility of official promises to defend the value of the primary currency.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 1992 The Authors
Subjects: H Social Sciences > HG Finance
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Series: Working Papers > CEP Discussion Papers
Date Deposited: 21 Aug 2008 10:30
Last Modified: 28 Feb 2013 14:56
URI: http://eprints.lse.ac.uk/id/eprint/21065

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