Dear Colleagues,

My paper, "Is Numérairology the Future of Monetary Economics? Unbundling
Numéraire and Medium of Exchange through a Virtual Currency and a Shadow
Exchange Rate", whose electronic version was published online on May 03,
2003, in the Open Economies Review (printed version to follow shortly), was
selected by the publishers of the journal (Springer) for 'Springer open
access'. This means it can be downloaded without cost by anyone. The paper
can be accessed for downloading from the following URL:
http://dx.doi.org/10.1007/s11079-007-9035-7

An abstract of the paper follows:

Abstract:
The paper discusses some fundamental problems in monetary economics
associated with the determination and role of the numéraire. The issues are
introduced by formalising a proposal, attributed to Eisler, to remove the
zero lower bound on nominal interest rates by unbundling the numéraire and
medium of exchange/means of payment functions of money. The monetary
authorities manage the exchange rate between the numéraire ('sterling') and
the means of payment ('drachma'). The short nominal interest rate on
sterling bonds can then be used to target stability for the sterling price
level. The paper puts question marks behind two key bits of conventional
wisdom in contemporary monetary economics. The first is the assumption that
the monetary authorities define and determine the numéraire used in private
transactions. The second is the proposition that price stability in terms of
that numéraire is the appropriate objective of monetary policy. The paper
also discusses the merits of the next step following the decoupling of the
numéraire from the currency: doing away with currency altogether-the
cashless economy. Because the unit of account plays such a central role in
New-Keynesian models with nominal rigidities, monetary economics needs to
devote more attention to numérairology-the study of the individual and
collective choice processes that govern the adoption of a unit of account
and its role in economic behaviour.
Keywords: Zero lower bound - Cashless economy - Price level determinacy -
Optimal inflation
With regards,

Willem Buiter

Professor Willem H. Buiter CBE, FBA
Chair of European Political Economy,
European Institute
London School of Economics and Political Science
Houghton Street
London WC2A 2AE
United Kingdom
Tel.: + 44 (0)20 7955 6959
Fax: + 44 (0)20 7955 7546
E-mail: w.buiter@lse.ac.uk
Web: http://www.nber.org/~wbuiter/

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