Currency substitution under finance constraints

Russell S. Boyer; Geoffrey H. Kingston

doi:10.1016/0261-5606(87)90001-5

Currency substitution under finance constraints

Russell S. Boyer^*, Geoffrey H. Kingston

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

10 Citations (Scopus)

Abstract

The perfect-foresight continuous-time couterpart of Lucas and stokey's cash-in-advance model is generalized to the case of two currencies. The money demand function for eac currency has as arguments the endowments of goods associated with each denomination. Various monetary shocks are investigated including permanent and temporary changes in levels and growth rates. It is shown that substitution can be an important factor in explaining: the possible negative transmission of inflation, the amount of volatility of exchange rates, and the degree tp which exchange rate movements approximate a random walk.

Original language	English
Pages (from-to)	235-250
Number of pages	16
Journal	Journal of International Money and Finance
Volume	6
Issue number	3
DOIs	https://doi.org/10.1016/0261-5606(87)90001-5
Publication status	Published - 1987
Externally published	Yes

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10.1016/0261-5606(87)90001-5

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title = "Currency substitution under finance constraints",

abstract = "The perfect-foresight continuous-time couterpart of Lucas and stokey's cash-in-advance model is generalized to the case of two currencies. The money demand function for eac currency has as arguments the endowments of goods associated with each denomination. Various monetary shocks are investigated including permanent and temporary changes in levels and growth rates. It is shown that substitution can be an important factor in explaining: the possible negative transmission of inflation, the amount of volatility of exchange rates, and the degree tp which exchange rate movements approximate a random walk.",

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AU - Kingston, Geoffrey H.

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AB - The perfect-foresight continuous-time couterpart of Lucas and stokey's cash-in-advance model is generalized to the case of two currencies. The money demand function for eac currency has as arguments the endowments of goods associated with each denomination. Various monetary shocks are investigated including permanent and temporary changes in levels and growth rates. It is shown that substitution can be an important factor in explaining: the possible negative transmission of inflation, the amount of volatility of exchange rates, and the degree tp which exchange rate movements approximate a random walk.

UR - https://www.scopus.com/pages/publications/38249033201

U2 - 10.1016/0261-5606(87)90001-5

DO - 10.1016/0261-5606(87)90001-5

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JO - Journal of International Money and Finance

JF - Journal of International Money and Finance

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ER -

Currency substitution under finance constraints

Abstract

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