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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page `Home' Base and Monetary Base Rules: Elementary Evidence from the 1980s and 1990s
Philip N. Jefferson

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.

Keywords: Currency abroad, monetary base, nominal income

Full paper (216 KB PDF) | Full paper (210 KB Postscript)

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Last update: July 16, 1997