May 1997

'Home' Base and Monetary Base Rules: Elementary Evidence from the 1980s and 1990s

Philip N. Jefferson


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 (210 KB Postscript)

Keywords: Currency abroad, monetary base, nominal income

PDF: Full Paper

Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment. The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.

Back to Top
Last Update: February 12, 2021