Finance and Economics Discussion Series (FEDS)
May 1997
'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.
Full paper (210 KB Postscript)Keywords: Currency abroad, monetary base, nominal income
PDF: Full Paper
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