Essential interest-bearing money
AbstractI examine optimal monetary policy in a Lagos and Wright [R. Lagos, R. Wright, A unified framework for monetary theory and policy analysis, J. Polit. Economy 113 (2005) 463-484] model where trade is centralized and all exchange is voluntary. I identify a class of incentive-feasible policies that improve welfare beyond what is achievable with zero intervention. Any policy in this class necessarily entails a non-negative inflation rate and a strictly positive nominal interest rate. Despite the absence of a lump-sum tax instrument, there exists an incentive-feasible policy that implements the first-best allocation.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 145 (2010)
Issue (Month): 4 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622869
Money Interest Friedman rule Voluntary trade Incentive-feasible policies Efficient implementation;
Other versions of this item:
- David Andolfatto, 2007. "Essential Interest-Bearing Money," Discussion Papers dp07-16, Department of Economics, Simon Fraser University.
- Andolfatto, David, 2007. "Essential Interest-Bearing Money," MPRA Paper 4780, University Library of Munich, Germany.
- David Andolfatto, 2008. "Essential Interest-Bearing Money," EIEF Working Papers Series 0802, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2008.
- David Andolfatto, 2009. "Essential interest-bearing money," Working Papers 2009-044, Federal Reserve Bank of St. Louis.
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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4681, University Library of Munich, Germany.
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