Currency Issues Research Articles

Creating a country through currency and stamps: state symbols and nation-building in British-ruled Palestine

Recent studies have examined the use of currency and stamps for nation-building in various contexts, with these artefacts seen as vehicles for indoc- trination and gaining legitimacy by ruling elites – as a form of ‘‘banal nationalism’’. This article goes further to argue that in moments of geopolitical upheaval, these symbolic artefacts can play a crucial role in shaping the very framework of nation- hood. This article focuses on the Middle East during World War I and its aftermath, and on British efforts to shape public opinion through the issuing of Palestine postage stamps and currency (1920–7), which were intended to convey Britain’s commitment to Zionism. Parallels are drawn to the introduction of Arab stamps and flags during the Arab Revolt (1916–18). The benefit to Zionist nation-building and ‘‘Hebrew Revival’’ is discussed, as well as the strikingly different reactions of local constituencies – Arabs and Jews – to the political message of these symbolic objects.

Regional Single Currency Effects on Bilateral Trade with the European Union

This paper empirically examines the regional effects of sharing a single currency on bilateral trade with other European Union partners. It takes advantage of a gravity specification of bilateral trade between 17 Spanish regions and 13 European countries over the period 1997-2004, which in turn allows accounting for two distinct definitions of a single currency depending on its temporal set up. That is, the “exchange rate volatility effect” (from exchange rate fixing in 1999) is distinguished from the so-called “common currency effect” (resulting from the issuing of a new currency in 2002). Findings are suggestive of a regional concentration of currency union effects in a few regions, namely those relatively more open to trade. Such effects on regional trade within Europe are found to fade away over time. Trade enhancing effects are found to vary range from 45% to 16%. When the “exchange rate volatility effect” was significant, the pure currency union effect was found to be almost negligible.

Is it time for a world currency unit?

AbstractA supranational currency, the World Currency Unit (Wocu), has recently been introduced. It creates potential opportunities for currency and risk management for businesses involved with international transactions. The authors look at the issues of a world currency, including how corporate treasurers can use it. © 2010 Wiley Periodicals, Inc.

SEIGNIORAGE, LEGAL TENDER, AND THE DEMAND NOTES OF 1861

I. INTRODUCTION Shortly after the onset of hostilities at Fort Sumter, the Lincoln administration asked Congress to authorize the first large-scale issue of federal paper currency. Officially labeled as United States Notes, they were popularly known as the Demand Notes of 1861. The administration's action is unremarkable. The extraordinary revenue requirements of long and costly wars are often met, in part, by issuing paper money. More surprising (and not widely recognized) is that this initial issue of paper money carried provisions that largely prevented it from yielding sustainable revenue (seigniorage). These provisions were largely omitted for the successor currency to the 1861 Notes (also known as United States Notes, but popularly as Greenbacks). As a result, its seigniorage potential was greater (although seigniorage was limited by other provisions). In modern software jargon, the Greenbacks might be viewed as 1861 Notes version 2.0: a version better suited to sustain a flow of seigniorage. However, the government was unable to replace the latter with the former very quickly, resulting in an extended period during which two paper currencies with different properties circulated side by side both with each other and with gold coin. This somewhat untidy situation provides an interesting (and heretofore underexploited) experiment for economists. These alternative monies circulated widely with market-determined exchange rates for a substantial period during which the amounts of both paper currencies in circulation greatly increased before the 1861 Notes were removed from circulation. We have collected daily data on these exchange rates and report them as differing gold premiums for the competing paper monies. Below, these data are exploited to calculate the seigniorage cost of the various provisions of the 1861 Notes and to provide evidence on alternative theories of expectations formation during this period. Our paper has three sections. The first presents a more extensive discussion than has been previously available of the 1861 Notes. In the second, a simple analytical framework is used to demonstrate and, where possible, estimate the seigniorage costs of the provisions attached to these notes. The third section analyzes the market relationship between gold and the simultaneously circulating 1861 Notes and Greenbacks prior to the (all but complete) retirement of the former in 1863. The paper concludes with a summary. II. THE DEMAND NOTES OF 1861 The major focus of this paper is on the Demand Notes of 1861, the first large-scale federal experiment with paper money. (1) We concentrate on these notes for two reasons. First, little has been written about them. Mitchell (1902), in his pioneering work on Civil War finance, devotes only 7 pages to them while devoting 17 pages to fractional currency and minor coins during the war. In addition, most of his discussion concerns the period prior to suspension. More recently, Calomiris (1988a, 1988b, 1992) makes reference to the 1861 Notes, but only as a part of his discussion of Greenbacks. Second, the paradox of issuing largely seigniorage-free paper money to help finance a war has not been well recognized and, hence, largely unexplained. This conflict between means and ends is interesting in its own right and illuminates some of what is puzzling in the sequence of monetary events over the first half of the Civil War. As a part of our discussion of the 1861 Notes, we challenge or extend the existing literature in three ways. First, we demonstrate that the conclusion of Studenski and Krooss (1963, 141, 144) that these notes were only used by the government to pay salaries and, hence, in their words, were a pseudomoney is mistaken. Examination of the financial press of the day suggests that these notes were not only popular but also circulated widely as money. A convincing claim can be made that they were indeed a national currency. …

Freedom, justice and peace possible only with correct wealth measurement with a unit of wealth as currency

PurposeThe purpose of this paper is to study the process of price determination by the market in the existing variable fiat money regime and its consequences.Design/methodology/approachScientific knowledge pertaining to units and measurement has been applied to study the issue of wealth measurement and to arrive at the consequences of monetary manipulation. As regards Shariah perspective it may be described as guided application of science to the issue of currency and wealth measurement to analyze and solve economic problems.FindingsManipulation of currency that is manipulation of quantity of what determines purchasing power of money does not allow market to determine just prices implying lack of justice in exchange. Profitability of economic activities no longer relates to their utility for the economy implying gross inefficiency in profit driven investment. Market fails to maintain economic balances. These amount to extreme losses. It has led to massive economic uncertainty, instability, disparity, corruption and conflicts. Economic growth, justice and peace become unattainable. It is a serious crime as currency being unit of wealth is the most important unit and it is strictly prohibited in Shariah. Unless corrected for monetary manipulation financial modes recommended by Shariah seem to be unjust and impractical.Research limitations/implicationsApplication of scientific approach and scientific knowledge to economic issues especially the issue of wealth measurement needs higher emphasis, efforts and resources.Practical implicationsGovernments ought to be persuaded not to manipulate money. Right solution is to link currency with a standard basket of national products with sufficient weight for gold and silver having most stable purchasing power. Unless accounting is corrected for monetary manipulation preferred Islamic modes of finance seem to be unjust and impractical. Where currency is manipulated Shariah/justice requires accounting for dues, capital, profit and loss to be corrected for this manipulation and in present scenario relative change in Consumer Price Index and Whole Sale Price Index may be used as a measure of currency manipulation.Originality/valueMonetary manipulation has been clearly defined and extreme severity of the problems it creates has been established. It is most important for researchers, academics, government functionaries, social workers and all those who are concerned with economic growth, justice and welfare.

A TEORIA DA DESREGULAMENTAÇÃO DA ATIVIDADE BANCÁRIA

Este trabalho analisa três proposições teóricas sobre a teoria da desregulamentação da atividade bancária A primeira delas defende a idéia de que a existência de um mecanismo interbancário de compensação impede o excesso de emissão por parte de um banco individual A segunda propõe que um sistema competitivo provê incentivos suficientes para que os emissores individuais busquem a credibilidade das suas moedas e, com isto, mantenham-se nos limites de segurança de emissão, A terceira propõe que a restrição do desconto bancário às real bills limita a quantidade de moeda que os bancos emitem e que são apenas as restrições legais que impedem a criação de moedas privadas, que são demonstavelmente eficientes. O texto sugere que a adoção de um sistema totalmente desregulamentado implica em falências bancárias. A autora propõe algumas precauções a serem impostas sobre os proprietários e gerentes que dariam incentivos à prudência nos empréstimos e investimentos.

Choice of the Path of Fiscal and Monetary Policy Coordination in China

he role of monetary policies regulating social the aggregate demand is highlighted, while the role in restructuring the supply and demand are greater limitations. The Central Bank indirectly affects the currency in circulation and the total size of credit by adjusting the statutory deposit reserve rate, the rediscount rate, open market operations; The Central Bank increases or decreases in money supply by limiting the loan quota and the currency issuance. Thus the role of the monetary policies in alleviating serious problems in the field of circulation area is more rapid, clear and effective. However, the central bank can not loan directly to a large number of economic development in lagging industries especially public goods industries as a result of the restrict of the credit funds movement, and therefore the role of monetary policies in improving the social structure and the rate relationship of national economy is relatively limited. The structural imbalance between domestic demand and external demand makes the Chinese economy affected seriously in the circumstances of the U.S. financial crisis and a sudden decline in global demand.

Paper money and national distress: William Huskisson and the early theories of credit, speculation and crises

This paper examines the explanation of commercial crises offered by William Huskisson in 1810 in the wake of the debate on the Bullion Report. Huskisson argued that the suspension of convertibility made it possible to extend issues of paper currency beyond its proper limits. Such an expansion, being in the interest of all parties concerned, would actually take place and stimulate excessive speculations, which would eventually prove unsustainable and bring generalized ruin and distress. Although some elements of these explanations were not new (having been anticipated by writers such as James Currie in 1793, William Roscoe in 1793, William Anderson in 1797 and some anonymous writers in 1793 to 1796), Huskisson's explanation is more systematic and better organized, and his emphasis on the endogenous character of the crisis and on the instability of the dynamics of trade and credit makes it an interesting foreshadower of the theories of crises that were advanced half a century later.

Personalty interests at the Constitutional Convention: new tests of the Beard thesis

Charles Beard ([1913] 2004) argued that the U.S. Constitution was created to advance the interests of people who owned personalty, particularly those at the Constitutional Convention. Because delegate votes on individual clauses at the Constitutional Convention were not publicly recorded, prior empirical analyses have been limited to inferred votes on a specific set of unrelated clauses. We extend this inquiry by inferring votes related to currency and debt issues which Beard put forth as the prime issues for those who owned personalty. Our analysis on these votes generates little support for a narrow version of the Beard thesis, which states that all personalty groups voted in a unified coalition at the Convention and supported the Constitution. Our analysis provides some support, however, for a broader interpretation that personalty and realty interests affected delegate voting behavior at the margin.

Options for Rebuilding the Economy and the Financial System

This paper outlines four non-exclusive options for reforming the financial system. Three options are based on the re-introduction of cost carrying money supported by Gesell (1916), Fisher (1933) and Keynes (1936), but in electronic form. One variant is a government issue redeemable into official money as proposed by the US Bankhead-Pettengill Bill of 1933. A second option is to allow private issues redeemable into official money as occurred during the Great Depression in countries that included Germany, Austria and the US. The third option involves private currency issues convertible into specified commodities as occurred in Europe in the 1920’s. The tethering of a currency to the local value of Kilo-Watt-Hours of electricity generated from benign renewable energy resources is identified as a way to create “green” dollars. In this way a global unit of account could be created with a unit of value determined by the local endowment of benign sustainable energy resources. The investment cost per unit of output from renewable resources is typically around three times greater than burning carbon. This makes any compounding interest costs of renewable energy over three times that of carbon burning generators. One outcome of using cost carrying or negative interest rate money is to significantly improve the competitiveness of renewable energy to reduce the need for carbon taxing or trading. In addition, the value of green money tethered to the average cost of power from many generators in each bioregion would be relatively stable. Market prices in each region would become more predictable for investors and insulated from alien financial crises, speculators and terms of trade. The fourth option involves using existing fiat money to reduce: (i) the cost of seigniorage, (ii) interest on government debt; (iii) size of organisations considered too big to fail; (iv) tax incentives to favour equity rather than debt; (v) the different types of risks accepted by financial institutions, and (vi) ability of banks and “shadow” banks to create credit to finance derivatives many times greater than the GDP of the global economy.

Personalty Interests at the Constitutional Convention: New Tests of the Beard Thesis

Charles A. Beard ([1913] 2004) argued that the U.S. Constitution was created to advance the personalty interests of many of the delegates to the Constitutional Convention. Because delegate votes on individual clauses at the Constitutional Convention were not publicly recorded, prior empirical analyses have been limited to inferred votes on a specific set of unrelated clauses. We extend this inquiry by inferring all votes related to currency and debt issues which Beard put forth as the prime issues for those who owned personalty. Our analysis on these votes generates little support for a narrow version of the Beard thesis, which states that all personalty groups voted in a unified coalition and supported final passage of the Constitution. Our analysis provides reasonable support, however, for a broader interpretation that personalty and realty interests affected delegate voting behavior at the margin.

Currency Asymmetry, Global Imbalance, and Rethinking Again of International Currency System

The US dollar has been volatile and falling again and again in recent decades as well as recent years, and for many observers, it is going to be broken sooner or later. The central importance of the dollar is due to the fact that it is not just a currency for the US. Over half of all dollar bills in circulation are held outside of the US borders, and almost half of the US Treasury bonds are held as reserves by foreign central banks. The US dollar is supposed to be the anchor that stabilizes the currency market. Instead, today it is a major source of instability. In the back ground, the US fiscal deficits have been running high again under Bush administration, once up to almost 3% of US GDP. And current account deficit is set to about 7% in 2005 and more volatility is widely expected. The situation is very challenging for the central banks of Japan, China, Korea, Taiwan and Singapore which collectively hold about US$2.8 trillion worth of US Treasury bonds as part of their reserves. The moment that they reduce their purchases, the value of the dollar slips. Yet, the more they buy, the more they are exposed to a potential free fall of the US dollar. China has been blamed, not only by US congressmen who are understandably not very familiar with either the complicated currency issues or the domestic politics in any other country, but also many economists or business strategists. It was said that it was all because RMB did not reevaluate, as the source of this global and currency instability. How much revaluation of RMB would remove the US deficits of $700 billions, or at least the US-China trade deficits $200 billions (including Hong Kong)? 500% or 1000%? Of cause no body asked for that kind of magnitude now. Normally smart people say 30-50%, with the unsaid intention to blame-then-suggest again another 30-50% after some initial moves, then the third, the fourth. This seems not really new phenomena at all. It has been all so familiar before and since the Nixon shock in early 70s', and in 80s' when there was the Plaza Accord. The convenient targets to blame were the gold standard, the Dutch Mark, the Japanese Yen. Now it is turn for Chinese reminbi. So the question is what are the real causes of the imbalance and currency instability? In this short paper, we first take a look at what is really going on with the Chinese economy and trade balance, and then try to identify sources of the current imbalance , and then, as a concluding remark, think again the possibilities to reform the currency system.

Equivalence of Three Allocation Currencies as Estimates of Reproductive Allocation and Somatic Cost of Reproduction in Pinguicula vulgaris

Which is the most appropriate currency (biomass, energy, water, or some mineral nutrient) for expressing resource allocation in plants has been repeatedly discussed. Researchers need to assess to which extent interindividual, interpopulational, or interspecific comparisons of resource allocation could be affected by the allocation currency chosen. The "currency issue" is relevant to at least three related aspects of resource allocation to reproduction: (a) reproductive allocation (RA), (b) size-dependence of reproductive allocation, and (c) somatic cost of reproduction (SCR). Empirical tests have mostly dealt with the first aspect only. We examined the equivalence of estimates for the three aspects above across three different allocation currencies (dry mass, N, P) in 11 populations of PINGUICULA VULGARIS. For RA we studied the equivalence of allocation currencies at three scales: among individuals of the same population, between populations of the same species, and among species. Equivalence of currencies in the ranking of RA for individuals within populations was high ( RS >/= 0.43) and did not strongly decrease when comparing populations or species. Excepting for size-dependence of RA, ranking of RA, or SCR between populations was equivalent for biomass and N, but not for P. Our study gives two positive guidelines for empirical plant reproductive ecologists facing the "currency issue": (1) become increasingly concerned about the "currency issue" as you increase the scale of your comparison from individuals to populations to species, and (2) avoid estimating allocation in redundant currencies (biomass and N in our case) and choose preferentially "complementary" currencies that provide a broader view of allocation patterns (biomass and P in our case).

Foreign currency-denominated borrowing in the absence of operating incentives

It is well known that corporations issue foreign currency-denominated debt to hedge foreign currency cash flows with offsetting interest payments. We test an alternative “opportunistic” motive for foreign currency-denominated borrowing. We do so by constructing a comprehensive sample of foreign currency-denominated bonds issued by sovereign government and agency issuers with no foreign currency cash flows or foreign operations. We find strong and consistent evidence that the borrowers in our sample consider cross-currency differences in covered and uncovered interest yields in choosing the currency in which to denominate their international debt. We estimate the average gains to opportunistic covered yield borrowing to be 4 to 18 basis points. Interestingly, we also find that the average bond offering in our sample precedes a large and beneficial depreciation of the issue currency over the course of the following year. These results support what has been a frequent conjecture in the foreign debt market.

Government Bonds in Domestic and Foreign Currency: the Role of Institutional and Macroeconomic Factors*

AbstractIn contrast to some recent research, this paper finds that institutional and macroeconomic factors are related to the depth and currency composition of government bond markets. Using panel data for developed and emerging economies, we find several factors to be systematically associated with bond markets. Aside from economic size (already shown to affect the currency composition), this paper shows that investor bases matter. Economies with deeper domestic financial systems (measured by bank deposits and stock market capitalization) have larger domestic currency bond markets and issue less foreign currency debt, whereas foreign investor demand is positively related to the size and share of foreign currency bonds. Moreover, less flexible exchange rate regimes are associated with more foreign currency issuance. Other relevant variables include inflation, fiscal burden, legal origin, and capital account openness.

The Currency Board and the Rise of Banking in East Africa

The East Africa region consists today of three independent countries, Kenya, Tanzania (formerly Tanganyika) and Uganda, which, from the early 1920's to the achievement of independence, formed an administrative unit under British rule: the British East Africa. The paper presents an historical synthesis of the basic problems and developments of the monetary and banking system in British East Africa. The research covers the period included between the beginning of European colonisation and the attainment of independence by the three above mentioned countries and focuses on the experience with a currency board arrangement in this context. A survey on commercial banking in the region, reveals that this industry, since its rise, carried the imprinting of the British banking tradition. In the first stage of monetary evolution, owing to the influence of Indian trade and settlement in East Africa, the currency most in use was undoubtedly the Indian rupee. In that period banking industry landed in East Africa, brought in by European colonial powers. The second stage in monetary evolution began when a currency board was established, in 1919, in the British colonial possessions of East Africa, just after the acquisition, as loot, of Tanganyika, a colony previously under German rule. Originally the area of Board's operations, i.e. the East African shilling monetary area, consisted of the three mentioned territories. Zanzibar was added in 1936. During World War II were included, temporarily, in the area also Aden and British Somaliland and eventually the former Italian colonies of Eritrea, Ethiopia and Somalia. The start of activity by the E.A. Currency Board was not easy. In 1925, when the conversion of circulating rupees was completed, because of overvaluation of silver coins in the exchange rate adopted, the E.A. Currency Board suffered substantial losses and the reserve ratio was 43.6 per cent. Yet the situation worsened with the crisis of the colonial economy during the depression of the 30's, which caused a sharp decline in money supply in East Africa because of heavy redemption of local currency. In 1932 the lowest point was reached with the reserve ratio at only 9.9 per cent. Circulation of E.A. shillings increased rapidly after 1940 because of war economy and of a favourable balance of payments of the colonies. In addition, a great enlargement of the original currency area was achieved following British military conquests in the Horn of Africa. In 1950 the circulation was fully covered by reserves, but during the previous decades the colonial currency was mainly based on government credit. However, it was not until 1956, that the fiduciary issue was officially introduced and, by this event, reasonable opportunities for monetary policy were offered. This innovation was introduced to free part of the external reserves held in London. Prior to that act the role of the Currency Board was just passive because the automatic exchange of currency did not allow any kind of money management. It represented a simple and inexpensive mechanism directed to issue currency. A long period of British rule came to an end when the colonial territories of East Africa obtained political independence and this dramatic change marked the epilogue of the story of the colonial monetary institution. The new emerging states would not accept to renounce monetary sovereignty. Therefore the liquidation of East African Currency Board was decided and the establishment of three national central banks was officially announced simultaneously in June 1965 by the governments of Kenya, Tanzania and Uganda. The East African Currency Board ceased operations one year later.

Party Games: Getting, Keeping, and Using Power in Gilded Age Politics (review)

Reviewed by: Party Games: Getting, Keeping, and Using Power in Gilded Age Politics John A. Jones and Virginia H. Jones Party Games: Getting, Keeping, and Using Power in Gilded Age Politics. By Mark Wahlgren Summers. Chapel Hill: University of North Carolina Press, 2004; pp ix + 352. $59.95 cloth; $22.50 paper. Combining rigorous research, superb narrative capacities, and robust enthusiasm for his subject, seasoned historian and writer Mark Wahlgren Summers [End Page 318] relates the complex and comprehensive details accounting for the survival and thriving of the two-party system in American politics. He provides annotated references and an extensive bibliography encompassing manuscript collections, newspapers and periodicals, books, professional journal articles, and unpublished dissertations. Kindred writings by Summers, Thomas D. Clark Professor of History at the University of Kentucky, include Gilded Age, or, The Hazard ofNew Functions (1997) and Rum, Romanism, and Rebellion: The Making of a President,1884 (2000). "The Gilded Age" (1865–1901), a coinage adapted from the title of a novel by Mark Twain and Charles Dudley Warner, is a time of driving transformation and momentum. The tempo and temptations of everyday life lend themselves to pugilism, greed, and "hoopla politics." The expansion of the railroads, growth of cities, immigration, controversies concerning both tariff rates and trade, currency issues, worker protection demands, development of big business, franchise issues for blacks and women, emergence of alternative political parties, forging of a national identity, social class issues, prohibitionism, race relations, agrarian economic problems, and civil service reform create battlefields of action for Party Games: Getting, Keeping, and Using Power in Gilded Age Politics. Conflicting interests lend themselves to the development of factions, fusionism, and fence-sitting. The creation of alternative political parties heightens interest in the political process, generates widespread voter participation, and, on occasion, modifies the platforms and activities of the two major political parties. "Party hoopla" ranges from a festive atmosphere to voter intimidation, fraud, and vote buying. Local, state, regional, and national politics each waves the banners of this energized, corrupt atmosphere. The author asserts this central theme and purpose: "The popular politics of the Gilded Age . . . was a guided popularity, where great work behind the scenes went into driving as many voters to the polls as possible. That was the politicians' job. How they did that job, and how that affected the shape of Gilded Age politics and set limits on the possibilities for change, is what Party Games is all about" (xii). "Third parties flared, flickered, and guttered out" (x). Summers answers the question "What accounts for the demise of third parties and the tenacity of the two major parties?" Party Games will interest scholars focusing on the history of political parties, nineteenth-century political campaigns, labor union history, the impact of big business (such as railroads) on political processes, and the effects of reform movements. Media specialists will appreciate Summers's expansive commentary on the role of the press in political contests. Those involved with public address will gain insight into the Gilded Age milieu influencing rhetorical events—a popular avenue of campaigning. Finally, individuals mindful of [End Page 319] ethical issues and practices will find abundant examples of unethical practices and their political and societal consequences. The author gives readers a flavor of the times in an engaging, reflective chapter, "Politics Is Only War without the Bayonets." The three keys to winning wars apply to political campaigns: "organization, discipline, and aggression" (34). Political discussions use military analogies such as "A campaign was 'the fight' or 'the smoke and dust of the battle.'" This reinforces the secondary role of women around the unsound reasoning of "those unable to defend America with bullets ought not to control it with ballots" (33). Summers focuses on the expanding role of "participatory politics." Neighborhood meetings, caucuses, and state and national conventions followed by campaigns embrace an ever wider portion of the voting (white male) population. A carnival atmosphere prevails with parades, marching bands, banners, and cartoons. An increasingly literate public is besieged with party newspapers, handbills, leaflets, political almanacs, "authorized campaign biographies," and, of course, newspapers. Accompanying this burgeoning distribution and popular media readership, press "rascality" accommodates the printing of forged letters, decoded telegrams, and lying...

Monetary policy implications of electronic currency: an empirical analysis

Using the 2001 Survey of Consumer Finances, evidence is found that electronic currency is not a substitute for demand deposits: electronic currency ownership is associated with holding higher balances in checking accounts. These findings allay concerns that private sector issuance of electronic currency will inhibit the ability of central banks to conduct monetary policy.

Colonial Currency Boards: The Seigniorage Issue

Compared with using a foreign currency as the medium of exchange, a currency board enables a country to capture seigniorage that would otherwise have accrued abroad. The seigniorage takes the form of income on the foreign reserves that provide a 100 per cent backing for the currency board’s issue of domestic currency. But, given circumstances where a fixed exchange rate is optimal, can convertibility be sustained with a lower reserve percentage and, if so, is there a further national gain to be had from putting the released resources to some other use? This paper explores the attempts made to address these questions in the late 1940s and 1950s within the context of a debate about the colonial currency board system. At that time, most critics of the system saw it as handicapping development because it locked up excess foreign reserves that could be used to finance domestic investment. Some saw the system as also handicapping income stabilisation because lack of access to excess reserves hindered sterilisation of the monetary effects of external imbalances. Estimates of excess reserves that could be gainfully used for these purposes while preserving convertibility varied considerably, with some recognition that in principle very open economies might have none at all. Rough calculations in the present paper suggest that this was possibly the case for at least one currency board economy, and that for another with apparently large excess reserves, the gain from using them for domestic investment would have been very small.

Employing optimized combinations of one-class classifiers for automated currency validation

Automated currency validation requires a decision to be made regarding the authenticity of a banknote presented to the validation system. This decision often has to be made with little or no information regarding the characteristics of possible counterfeits as is the case for issues of new currency. A method for automated currency validation is presented which segments the whole banknote into different regions, builds individual classifiers on each region and then combines a small subset of the region specific classifiers to provide an overall decision. The segmentation and combination of region specific classifiers to provide optimized false positive and false negative rates is achieved by employing a genetic algorithm. Experiments based on high value notes of Sterling currency were carried out to assess the effectiveness of the proposed solution.