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Overcoming the zero bound : Gesell vs. Eisler. Discussion of Mitsuhiro Fukao's "The effects of 'Gesell' (currency) taxes in promoting Japan's economic recovery"

Buiter, Willem H. and Panigirtzoglou, Nikolaos (2005) Overcoming the zero bound : Gesell vs. Eisler. Discussion of Mitsuhiro Fukao's "The effects of 'Gesell' (currency) taxes in promoting Japan's economic recovery". International Economics and Economic Policy, 2 (2-3). pp. 189-200. ISSN 1612-4812

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Abstract

Despite the zero lower bound on the short nominal interest rate in Japan having become a binding constraint, conventional monetary policy in Japan, in the form of generalised open market purchases of government securities of all maturities, has never been pushed to the limit where all outstanding government debt and all current and anticipated future government deficits are (or are confidently expected to be) monetised. Open market purchases of private securities can create serious governance problems. Two ways of overcoming the zero lower bound constraint have been proposed. The first is Gesell’s carry tax on currency. The second is Eisler’s proposal for the unbundling of the medium of exchange/means of payment function and the numéraire function of money through the creation of a parallel virtual currency. This raises the fundamental issue of who chooses or what determines the numéraire used in private wage and price contracts—an issue that is either not addressed in the literature or addressed incorrectly. On balance, Gesell’s proposal appears to be the more robust of the two.

Item Type: Article
Official URL: http://www.springerlink.com
Additional Information: Published 2005 © Springer. The original publication is available at www.springerlink.com.
Library of Congress subject classification: H Social Sciences > H Social Sciences (General)
Sets: Departments > European Institute
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 20 Jul 2006
URL: http://eprints.lse.ac.uk/845/

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