Three Essays on Inflationary Monetary Policy and Political Economy

Joshua S. Ingber

Advisor: Donald J Boudreaux, PhD, Department of Economics

Committee Members: Alex Tabarrok, Carlos Ramirez

Online Location, #D150
April 17, 2020, 12:00 PM to 02:00 PM


My dissertation studies inflationary monetary policy, with consideration of the relevant political and institutional frameworks. All three essays connect seigniorage, the revenue from currency creation, with the underlying policy stakeholders and monetary institutions. This work demonstrates the importance of endogenizing the influence of political factors when analyzing economic policy outcomes.

Chapter 1 asks the question, is seigniorage-optimizing policy in fact linked with welfare enhancing or self-defeating outcomes? The chapter considers empirical evidence in answering the question, suggesting that, on average, seigniorage optimization is self defeating – leading to decreases in real Gross Domestic Product. In addition, the chapter includes a history of seigniorage, a summary seigniorage measurement, optimal seigniorage theories, and a survey of the political factors which lead to an inflationary monetary policy.

I follow in Chapter 2 with an in-depth empirical examination of confederate monetary policy during the Civil War. Confederate attempts at monetary reform reveal a policy inconsistent with seigniorage maximization, and that it was the bifurcation of the Confederate Congress into two groups – those representing areas outside of Confederate control and those representing the rebel government’s interior – that instantiated the sub-optimal policy.

The final chapter describes the natural experiment that is the hyperinflation during the end of the French Revolution. Analyzing Structural breaks in the cointegrating relationship between real money balances and the changes in inflation rates suggests that constitutional changes should be considered among the the determinants of the demand curve for real money balances. Thus, this chapter considers the role that rules governing the creation of money play, in influencing the public’s demand for money and the maximum effectiveness of inflationary finance.