FX Intervention in the New Keynesian Model

We develop an open-economy New Keynesian Model with foreign exchange (FX) intervention in the presence of a financial accelerator and shocks to risk appetite in international capital markets. We obtain closed-form solutions for optimal monetary and FX intervention policies assuming the central bank cannot commit to future policies, and we compare the solution to that under policy commitment. We show how FX intervention can help reduce the volatility of the exchange rate, of inflation, and of the output gap, thus mitigating welfare losses associated with shocks in the international capital markets. We also show that, when the financial accelerator is strong, there is a risk of indeterminacy (self-fulfilling currency and inflation movements) although FX intervention can reduce this risk and thus reinforce the credibility of the inflation targeting regime. Model simulations match well the impact of a VIX shock obtained by local projections on a panel of inflation targeting emerging markets.     

Would You Barter with God? Why Holy Debts and Not Profane Markets Created Money

Attempting to revitalize the substantive approach to economics in the tradition of K. Polanyi, this paper revives the neglected substantive theory of money's origins by Bernhard Laum and thus disputes the formal approaches that see the origins of money in the context of trade. A wide range of evidence, from archeological to etymological, is utilized to demonstrate that relations between men and God, carried out through the intermediary of state‐religious authorities, played a causal role in the genesis of the ox‐unit of value and account, and, further, in the origins of money, and, subsequently, coinage. The substantive state‐religious approach presented in this paper is also compared and contrasted to the Chartalist perspective on money's origins. It is concluded that the substantive approach presented in this paper differs from the more formal approaches (e.g., Metallism) because it does not rely upon a projection of modern institutions and habits of thought (e.g., a medium of exchange; monetary taxation) into ancient societies.