Dynamic Seigniorage Theory
AbstractThis paper develops a dynamic model of seigniorage in whicheconomies equilibrium paths reflect the ongoing strategicinteraction between an optimizing government and a rational public.The model extends existing positive models of monetary policy andinflation by explicitly incorporating the intertemporal linkagesamong budget deficits, debt, and inflation. A central finding is thatthe public s rational responses to government policies may wellcreate incentives for the government to reduce inflation and thepublic debt over time. A sufficiently myopic government may, however,provoke a rising equilibrium path of inflation and public debt.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 1 (1997)
Issue (Month): 03 (September)
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