Keywords: Currency abroad, monetary base, nominal income
Abstract: This paper evaluates the quantitative importance of removing
U.S. currency held abroad from the monetary base. We find that a
simple macroeconometric model that uses home base has more explanatory
power for changes in nominal income than a model using the total base.
Moreover, proposed base rules for the conduct of monetary policy
perform better when the model for home base is employed. The evidence
from our elementary exercises suggests that accounting for foreign
holdings of U.S. currency may also be important in other contexts.
Full paper (216 KB PDF)
| Full paper (210 KB Postscript)
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Last update: July 16, 1997