Parallel Currency Research Articles

Parallel Currencies under Free Floating Exchange Rates: A Model Setting Out the Conditions for Stable Currency Competition

We use a theoretical model to set up the conditions for a country to attain monetary stability by allowing for two freely tradable currencies to circulate in parallel. For this parallel system to function properly, confidence in the good behavior of the monetary authorities in charge of the two currencies is key. Our model shows how a floating exchange rate between the two can keep the issuers of the local currency in check. The results from our model show the conditions under which a parallel currency system disciplines the issuers of the currencies and thus maintains their purchasing power. In non-volatile economies, it also discourages governments (or private issuers) from inflating one of the currencies as a means to raise seigniorage, as this policy results in the displacement of the currency from the market. When foreign payments shortfall—such as in Greece and Cyprus during the ‘euro crisis’ in the mid-2010s, or intractable hyperinflation—leave the country without a medium of exchange, our model shows how currency choice can restore monetary circulation and offer a path to achieving and maintaining monetary stability.

Overcoming Recession and Financial Instability in a Global Financialised Economy? The Contribution of the ‘Crank Heretic’ Robert Eisler

ABSTRACT Recurrent shocks — be it geopolitical instability, pandemics, financial crises or climate change and climate transition effects — pose difficulties to permanently ensure a prosperous economy. The writings of Robert Eisler represent an early attempt to design an economic system to permanently stabilise the price level, to solve unemployment and prevent economic crises. Against the backdrop of the Great Depression of the 1920s, Eisler proposed an extensive reform package including public work programmes financed by debt monetisation, the introduction of a parallel currency to level out price level fluctuations as well as instruments for exchange rate stabilisation. Eisler’s work demonstrates the seminal insights that national economies are embedded in a global financial system and that any attempts to reform financial systems require international cooperation in order to be effective. Notwithstanding, Eisler is largely ignored both by monetary reformers and conservative economists, who, if at all aware of his work, declared him a ‘monetary heretic’. This paper analyses Eisler’s entire set of reform ideas for the first time and positions it within current economic policy discourses on the limits to monetary policies, on effective demand and public work programmes and the need to consider international capital when drafting monetary reform proposals.

The role of the euro as an international currency for Polish private and public sectors - selected issues

The paper discusses the usage of the euro as a parallel currency in Poland. The aim is to assess the importance of the euro as an international currency for Polish residents, with particular emphasis on reserve and investment currency. The main stress is put on the assessment of the use of euro-denominated bank deposits and loans. The paper is based on the international literature and statistical data. Main sources of necessary data were taken from publications delivered by European Central Banka and National Bank of Poland.

DIGITAL MONEY: OPPORTUNITIES AND CHALLENGES

Many parallel currencies have always circulated alongside the official currency. Today, a new generation of money is emerging from new technologies: “crypto-currencies”, the best known example of which is bitcoin. Although they constitute a remarkable technological advance, they raise many ethical and economic challenges, which this article tries to shed light on. These assets could eventually become new means of payment, or even units of account, thus reducing the demand for fiat currencies or central bank money. However, crypto-assets are too unstable and risky to really threaten fiat currencies. In this context, a group of leading economists and central bankers wondered whether advances in computing would make central banks obsolete. The digital age means new challenges, but also new opportunities for central banks. The motives for issuing an MDBC would therefore be to provide the public with a dematerialized monetary instrument without liquidity or credit risk that is resilient and easy to access, to curb the growth of crypto-assets and preserve monetary sovereignty. Key words: Digital Currency, Crypto-Currency, Central Bank, Sovereignty, Monetary Policy.

Persistent Food Shortages in Venetian Crete: A First Hypothesis

This paper examines the persistent food shortages in the island of Crete under Venetian rule (1204–1669) through the prism of the monetary system of Venetian territories and in combination with the other economic policies of the Venetian empire. From the available sources and analysis, it seems that the policies of Venice which prioritised the food security of the metropolis, the financial support to the elites, and the elite-favouring monetary and taxation system were contradictory and self-defeating. In particular, the monetary structure of the colonial economy and the taxation system seem to have been forcing both Cretans and Venetian settlers to produce wine for export instead of grain despite the repeated food shortages. The parallel circulation of various high-value (white money) and low-value (black money) currencies in the same economy and the insistence of the Venetian administration to receive taxes in white money seems to have been consistently undermining the food security policy adopted by the same authorities. The paper contributes to the discussion of how parallel currencies can stabilise an economy or can create structural destabilisation propensities, depending on coeval economic structures that usually go unexamined when we examine monetary instruments.

The Fiscal Arithmetic of a Dual Currency Regime

AbstractThere are several real‐world examples of local governments that faced with budget problems circulate a fiat token in parallel to the official currency. A well‐known case is the Argentinian “Patacon,” printed by the province of Buenos Aires during the crisis of 2001. We present a simple model to analyze the workings of monetary equilibria where the parallel currency is valued in equilibrium and discuss its consequence for real allocations in terms of an equivalent fiscal policy. We briefly discuss different model specifications and their fit to alternative historic experiences.

Post-COVID-19 EMU: Economic Distancing by Parallel Currencies

The coronavirus crisis has caused new distress in the European Economic and Monetary Union (EMU), as the southern part of the EMU has been hit stronger than the northern part. The common currency prevents nominal exchange rate adjustment in response to the asymmetric shock. Policymakers have therefore taken recourse to large-scale financial transfers. Based on the lessons from the German monetary union, this article proposes instead the introduction of parallel currencies to facilitate relative price changes. Parallel currencies in the south would allow an increase in competitiveness of the south via real depreciation. The introduction of a parallel currency in Germany would lead to capital inflows and a real appreciation of the new German mark. The pre-EMU pressure for structural adjustments and productivity gains would be restored.

Parallel Digital Currencies and Sticky Prices

The recent rise of digital currencies opens the door to their use in parallel alongside official currencies (dollar'') for pricing and transactions. We construct a simple New Keynesian framework with parallel currencies as pricing units and sticky prices. Relative prices become a state variable. Exchange rate shocks can arise even without other sources of uncertainty. A one-time exchange rate appreciation for a parallel currency leads to persistent redistribution towards the dollar sector and dollar inflation. The share of the non-dollar sector increases when prices in the dollar sector become less sticky and when firms can choose the pricing currency.

Parallel Digital Currencies and Sticky Prices

The recent rise of digital currencies opens the door to their use in parallel alongside official currencies (dollar'') for pricing and transactions. We construct a simple New Keynesian framework with parallel currencies as pricing units and sticky prices. Relative prices become a state variable. Exchange rate shocks can arise even without other sources of uncertainty. A one-time exchange rate appreciation for a parallel currency leads to persistent redistribution towards the dollar sector and dollar inflation. The share of the non-dollar sector increases when prices in the dollar sector become less sticky and when firms can choose the pricing currency. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Валютная интеграция на основе механизма параллельных валют

Валютная интеграция на основе механизма параллельных валют

Режим параллельных валют в зоне финансовой интеграции

The study presented in the article seems rather relevant due to the fact that the problem of indebtedness in the eurozone members has not been solved yet, and these countries still continue to accumulate debts. Therefore, the eurozone members are expected to find effective ways to restore competitiveness after the crisis of 2009‒2012 without exiting the single currency agreement. The research is aimed at encompassing the relations which come into being as a result of credit use, money circulation, and money transfer payments. Consideration of these issues seems very important since it can help restore the loss of monetary independence. The subject of the article is the ways to denominate debt securities in the currency units under the control of the national governments and the central bank. The main purpose of the paper is to develop the approaches to parallel circulation of a single currency unit which can be devalued to solve the debt problems. The practical significance of the article lies in the possibility to use the European experience in solving the problems of common currency circulation in the process of Eurasian currency and financial integration. In terms of economic theory, the results and general outcomes of the work are important for the development of a concept to rationalize monetary policy and money circulation. In conclusion, the article proposes a parallel currency circulation regime which allows a member country of the currency agreement to stay in the common currency area and retain some functions of the monetary policy which were sacrificed due to the creation and operation of the common central bank.

The legacy of a fractured Eurozone: The Greek Dra(ch)ma

This paper addresses neoliberal origins of the acute geoeconomic and social crisis that was inflicted on Greece since 2010 with the unleashing of the 3 consecutive bailout plans and the implementation of fierce austerity policies. We further scrutinize the composition of the soaring Greek debt and most importantly, the unsettling utilization of the troika loans for the 2010–15 period. For the first time in the literature, we provide evidence that the vast bulk of the loans went overwhelmingly not to benefiting a “profligate” Greek state but to avoiding the write-downs of bad loans made by reckless creditors (mainly, German and French banks) to the Greek government and private banks. We propose the temporary adoption of a parallel currency in the form of government IOUs, together with other drastic measures to reboot the ailing Greek economy inside the Eurozone.

Blockchains: How they work and why they'll change the world

Bitcoin was hatched as an act of defiance. Unleashed in the wake of the Great Recession, the cryptocurrency was touted by its early champions as an antidote to the inequities and corruption of the traditional financial system. They cherished the belief that as this parallel currency took off, it would compete with and ultimately dismantle the institutions that had brought about the crisis. Bitcoin's unofficial catchphrase, In cryptography we trust, left no doubt about who was to blame: It was the middlemen, the bankers, the trusted third parties who actually couldn't be trusted. These humans simply got in the way of other humans, skimming profits and complicating transactions.

LEGAL REGULATION OF PACIFIC FRANC ENISSION AND CIRCULATION

The essential condition for the development of financial law science is to address to foreign experience in legal regulation of social relations. The comparative legal researches can enrich the doctrine and contribute to the improvement of practice of implementation of financial legislation. This fully applies to the sphere of financial-legal regulation of social relations in the area of monetary circulation. Traditionally it is assumed that a single currency shall apply in the framework of the state. Meanwhile, several foreign countries have widespread practice of issue and circulation of regional and local currencies authorized by the government. That is why it is quiet crucial to understand the peculiarities of legal regulation of issuing CFP franc as a regional currency that is in circulation in French territories in the Pacific ocean. This article is devoted to the study of the order of issuing and circulating of CFP franc. The work discusses the specifications of the administrative-territorial division of the French Republic and its influence on the monetary circulation in the state. Also, the authors are exploring the genesis of the issuing institutions of France and their competence. So, in addition to the Bank of France, the institution of the overseas departments and issuing institution of the overseas territories have the right to carry out issuing of currencies. The main purpose of these bodies is to ensure the stable monetary circulation in the French overseas territories. The article concludes that the CFP franc is a means of providing additional liquidity for the growth of separate administrative-territorial entities. As a priority aim of introducing a parallel currency, the French government has considered the protection of the local population from the fluctuations of the national currency. The CFP franc is in circulation in a limited area and it is not recognized as a legal tender in Metropolitan France.

REPORT FROM THE SCIENTIFIC CONFERENCE PT: "PROJECT OF IMPLEMENTATION OF LOCAL LONG-TERM BALLS IN OPEN HOUSE" WHICH WAS REACHED ON 31 AUGUST 2016 IN THE HEART OF WARSAW HIGH SCHOOL IN OTWOCK

On August 31st, 2016, a scientific conference entitled "Implementation of parallel local currency in Otwock District" was held in Otwock near Otwock. The main topic of discussion during this Conference was the methodological assumptions of various concepts and formulas for the implementation of the parallel local currency in local government units applicable in the Otwock District. After several years of implementation of this type of parallel currency there should be positive trends confirming the acceleration of growth of the local economy, including improvement of the labor market situation and increase of tax revenues of the budget of the Otwock District, which will translate into increased investment in local infrastructure and improvement of quality of public services provided. Increased expenditure on education and public sector institutions' offerings.

RICHARD BOOK REVIEW BY A. WERNER PT.: "STRENGTHS IN ECONOMY. THE THREE BANKING THEORY AND THE UNIFORM EVIDENCE" DATED IN THE POLISH VERSION AUGUST 2016

This paper reviews the book by Professor Richard A. Werner entitled "A Lost Century in Economics. Three Theories of Banking and Accurate Evidence", that was translated and published in Polish in August 2016. This book has become an inspiration for the role, significance and need for reforming modern central banking systems and monetary systems in developed countries. Numerous discussions and reflections on the issues described in this book were made, inter alia, during several conferences held during the last few months. For example, the concepts and needs of the reform of modern central banking systems and monetary systems, as described by Professor Richard A. Werner, have been inspired the discussions that took place during the Conference on "Implementation of parallel local currency in the Otwock District", held on 31 August 2016 in the seat of the Warsaw Higher School in Otwock near Otwock.

Parallel Currency Markets and the Monetary Exchange Rate Model: A VECM Application to Turkey Over 1987–1998

This study takes a novel approach to testing the monetary model of exchange rate determination by allowing for distortions from the underground economy to be reflected via inclusion of the parallel exchange rate. Using a VECM methodology, an augmented model is tested and compared to a traditional flexible-price monetary model for Turkey over 1987–1998. While in-sample results are supportive of both models, out-of-sample analysis favors inclusion of the parallel exchange rate. Furthermore, the augmented model beats a random walk with and without drift over to mid-range forecast horizons. These results highlight the need to consider potential market distortions of exchange rate movements.

Money reform and the Eurozone crisis: panacea, utopia or grassroots alternative?

The economic crisis that broke out in 2007–2008 and the ongoing crisis in the Eurozone has given a new urgency to discussions about alternatives to capitalism, and a new salience to proposals for monetary reform and for grassroots economic alternatives. Using Marx and Engel’s concept of Utopianism as an analytical tool to distinguish between what is the work of ‘cranks’, and what of ‘brave heretics’, the paper examines four monetary responses to the crisis: (1) Positive Money’s call for a state monopoly on money issuance; (2) the reintroduction of national currencies, in particular the drachma; (3) proposals for state-issued parallel currencies; and (4) grassroots or subaltern money networks of various types. The paper argues that the dominance of neoliberal ideology at a European Union level means that proposals for monetary reform at the international and national level are unlikely to be taken seriously by elites and consequently seem utopian in Marxian terms. There seems to be little political will to engage with the complexities of and potential opportunities of a more diverse monetary architecture within the Eurozone, and a perceived need to ‘discipline’ potentially ‘irresponsible’ governments like Greece’s SYRIZA, although ‘responsible’ actors in the north of the Eurozone get more leeway. The potential of grassroots alternatives is also too often overstated. While alternative currency networks developed as part of the Greek crisis are not particularly well developed, alternative currency networks could work as sites of innovation, normalising the idea that there are progressive alternatives to Eurozone breakup.

Viability of Implementing Direct Interest-Free Credit Clearance System in Muslim Countries

This study aims to examine the possibilities of implementing direct interest-free credit clearance (DIFCC) system,which is one of the viable alternatives to solve the problems of contemporary currency system. The DIFCC, which is based ona netting system,has been implemented successfully by several countries in the conventional setting, not to replace the current fiat money system, but rather as a parallel complementary currency. In this system, the distribution of credit as money will not be monopolized by the commercial banks, rather the distribution ison a mutual basis as long as there are products or services that can be offered to others among the members. As such, the system is fairer compared to the fiat money system and is free from the prohibited elements in Islamic finance such as riba, gharar and maysir as it requires exchange of real goods and services. In the context of the Muslim countries, the negative socio-economic effects of using the fiat money will not allow the countries to attain the objectives of the Shari’ah(maqasid al-Shari’ah). This study discuss the viability of implementing the DIFCC model which essentially applies the concepts of muqasah (nett-off) and hiwalah (transfer), apart from assessing the Shari’ah-compliancy of the model to be implemented as an innovative product in Islamic finance.

The Eurozone Crisis and the Structured Grexit as the Proper Alternative for Greece

In our paper we argue that, the economic stagnation of only the euro zone countries in a world that is growing much faster, is mainly due to the overvalued euro and the related austerity policy measures imposed under Berlin guidelines, The malpractices of the international markets, the underground currency wars between the dollar, the euro and the yen, are also to blame. The imposition of the euro zone as an optical currency area in totally different economies and without a fair political umbrella has been wrong. For Greece, it has been catastrophic. Between 2010- 2014, the country’s average annual GDP, declined at a yearly level of 4,6% and there are no signs that this will soon be reversed. The strict austerity policies imposed by the new 'Memorandum', will lead to more recession. In front of the deadlock, a structured Grexit is the proper alternative solution. This implies a controlled bankruptcy, suspension of debt payments and negotiations for cutting and extending its repayment period. During the initial negotiation days, the government must provide liquidity to the economy through the issuing of non-interest state bonds at a ratio of 1 : 1 in relation to the euro. Existing capital controls and transactions with electronic money will be helpful for the same cause. The next step is the issuing of the new drachma devaluated at 25-30%. In order to avoid hyperinflation, the amount of the new drachma produced, must not exceed a certain level of the M2. The euro may continue to be used as a parallel currency for a period decided in accordance with the result of negotiations and economic trends. Low and medium incomes could be increased gradually, in relation with labour productivity and GDP growth trends. Government spending restrictions, the combat of corruption, impunity, bureaucracy, tax evasion and the strengthening of productive investments, are also necessary for a healthy new beginning.