Is There a Self-Enforcing Monetary Constitution?

33 Pages Posted: 4 May 2013 Last revised: 16 Aug 2014

See all articles by Alexander William Salter

Alexander William Salter

Texas Tech University - Rawls College of Business; American Institute for Economic Research

Date Written: March 25, 2014

Abstract

A self-enforcing monetary constitution has rules that agents acting within the system will uphold even in the presence of deviations from ideal knowledge and complete benevolence and it thus does not require external enforcement. What would such a constitution look like? Such a constitution, I show that two regimes — a version of NGDP targeting that relies on market implementation of monetary policy, and free banking — meet these requirements for self-enforcing monetary constitutions. The analysis draws insights from political economy, and from constitutional political economy in particular.

Keywords: Central banking, constitutional political economy, free banking, monetary constitution, NGDP targeting, robust political economy

JEL Classification: B53, E42, E52, P16

Suggested Citation

Salter, Alexander William, Is There a Self-Enforcing Monetary Constitution? (March 25, 2014). Constitutional Political Economy, Vol. 25, No. 3, 2014. Available at SSRN: https://ssrn.com/abstract=2259794 or http://dx.doi.org/10.2139/ssrn.2259794

Alexander William Salter (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

HOME PAGE: http://awsalter.com

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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