The Idea of Central Banking in the Final Years of the First Polish Republic

The need to establish a national bank in the Polish Republic was addressed in 1763 by Fr Stanisław Konarski in his O skutecznym rad sposobie. The need to secure the issue of Polish money increased as a result of the crisis caused by the flooding of the Polish market with Polish coins counterfeited in Prussia. The discussion was joined by proponents of mercantilism, who saw the possibility of keeping good Polish money in circulation by using dead capital in “deposit coffers.” However, only the Sejm could establish a central bank. The first drafts saw the light during the sessions of the Four-Year Sejm (1788–1792). Among them, the proposal of the famous Warsaw banker Jędrzej Kapostas deserves our attention, who in 1789 published a work entitled O banku narodowym w Polszcze and Planta ułożenia projektu Banku Narodowego in the next year. Paper money in Poland appeared in circulation during the Kościuszko Uprising. To this end, the Treasury Notes Administration was established, which issued so-called “assignments.” They survived until the fall of the uprising. The Third Partition of Poland put an end to the discussion of the establishment of a central bank.

The Impact of Budget Deficits on the Ex Ante Real Interest Rate Yield on Long–Term Treasury Notes in the USA

Using four decades of data, this exploratory empirical study adopts a loanable funds model to investigate the impact of the federal budget deficit in the U.S. on the Ex Ante real interest rate yield on ten-year Treasury notes. For the 40- year period 1973-2012, empirical estimation using quarterly data reveals that the Ex Ante real interest rate yield on ten-year U.S. Treasury notes was an increasing function of the Ex Ante real interest rate yield on Moody's Aaa-rated corporate bonds, the Ex Ante real interest rate yield on three-month Treasury bills, and the increase in per capita real GDP, while being a decreasing function of net capital inflows (as a percent of GDP) and the monetary base (as a percent of GDP). In addition, it is found that the federal budget deficit (as a percent of GDP) exercised a positive and statistically significant impact on the Ex Ante real interest rate yield on ten-year Treasury notes, a finding consistent in principle with a number of prior studies of various interest rate measures during shorter and earlier time periods. A robustness test using the Ex Ante real seven-year Treasury note yield and annual data supports these findings.

The Problem of Inflation in Germany

This chapter examines the problem of inflation in Germany. In 1914 the German government based its war finance program on the assumption that World War I would be short. No additional taxation was introduced. Loans were considered sufficient to cover the total war expenses. The government obtained the necessary cash by discounting treasury notes with the Reichsbank which, in turn, sold these notes to banks and large business firms. Every six months loans were floated to redeem the treasury notes. The chapter begins with a discussion of Germany's war financing during the period 1914–1924, focusing on the post-war budget deficit and reestablishment of free prices, depreciation of the mark, and stabilization of the currency. It then considers Nazi Germany's finances during the period 1933–1943, along with the inflation problem after the defeat of Germany in World War II.

An Empirical Analysis of Determinants of Recent Federal Personal Income Tax Evasion in the U.S.

Unaccounted for currency in die U.S. has been argued to reflect die presence of widespread income tax evasion. In turn, income tax evasion is especially problematic in this era of large government budget deficits and growing national debts which have led to debt crises. This empirical study seeks to identify determinants of recent federal personal income tax evasion in the U.S. using the most recent tax evasion data available, data that run through 2008 and are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI (adjusted gross income) to reported AGI. The empirical estimates find that personal income tax evasion is an increasing function of the maximum marginal federal personal income tax rate, the interest rate yield on three year Treasury notes, per capita real income, and a dummy variable for the years in which the second war in Iraq was conducted, while being a decreasing function of the Tax Reform Act of 1986, the ratio of the tax free interest rate yield on high grade municipals to the taxable interest rate yield on ten year Treasury notes, the audit rate by IRS (Internal Revenue Service) personnel, and the average IRS penalty on detected unreported income. Thus, among other things, this study finds that more aggressive IRS policies are effective tools in the war against personal income tax evasion.