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Evaluating the welfare effects of alternative monetary arrangements

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  • Ayse Imrohoroglu
  • Edward C. Prescott

Abstract

The welfare effects of alternative monetary arrangements are computed for an economy calibrated to U.S. data. In the model world, people vary their holdings of liquid assets in order to smooth their consumption. In such worlds, we find that the feature of an arrangement that matters is the equilibrium after-tax real return on savings. We also find that relative to a tax on labor income, seigniorage is a poor source of revenue.

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Bibliographic Info

Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

Volume (Year): (1991)
Issue (Month): Sum ()
Pages: 3-10

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Handle: RePEc:fip:fedmqr:y:1991:i:sum:p:3-10:n:v.15no.3

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Keywords: Monetary policy;

References

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  1. Scheinkman, Jose A & Weiss, Laurence, 1986. "Borrowing Constraints and Aggregate Economic Activity," Econometrica, Econometric Society, vol. 54(1), pages 23-45, January.
  2. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  3. Cooley, T.F. & Hansen, G.D., 1988. "The Inflation Tax In A Real Business Cycle Model," Papers 88-05, Rochester, Business - General.
  4. Timothy J. Kehoe & David K. Levine & Michael Woodford, 1992. "The Optimum Quantity of Money Revisited," Levine's Working Paper Archive 2035, David K. Levine.
  5. Andreas Hornstein & Edward C. Prescott, 1989. "The firm and the plant in general equilibrium theory," Staff Report 126, Federal Reserve Bank of Minneapolis.
  6. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  7. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-20, April.
  8. Fischer, Stanley, 1981. "Towards an understanding of the costs of inflation: II," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 15(1), pages 5-41, January.
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Citations

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Cited by:
  1. Wilbur John Coleman II, 1992. "Solving nonlinear dynamic models on parallel computers," Discussion Paper / Institute for Empirical Macroeconomics 66, Federal Reserve Bank of Minneapolis.
  2. Preston J. Miller & Richard M. Todd, 1992. "Real effects of monetary policy in a world economy," Staff Report 154, Federal Reserve Bank of Minneapolis.
  3. Miller, Preston J. & Todd, Richard M., 1995. "Real effects of monetary policy in a world economy," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 125-153.
  4. Sunel, Enes, 2010. "On inflation, wealth inequality and welfare in emerging economies," MPRA Paper 25943, University Library of Munich, Germany.
  5. Clark A. Burdick, 1997. "A transitional analysis of the welfare cost of inflation," Working Paper 97-15, Federal Reserve Bank of Atlanta.
  6. Andrés Erosa & Gustavo Ventura, 2000. "On Inflation as a Regressive Consumption Tax," UWO Department of Economics Working Papers 20001, University of Western Ontario, Department of Economics.
  7. Matthias Doepke & Martin Schneider, 2006. "Inflation as a Redistribution Shock: Effects on Aggregates and Welfare," NBER Working Papers 12319, National Bureau of Economic Research, Inc.
  8. Freeman, John R., 1996. "A Computable Equilibrium Model for the Study of Political Economy," Bulletins 7484, University of Minnesota, Economic Development Center.
  9. Akyol, Ahmet, 2004. "Optimal monetary policy in an economy with incomplete markets and idiosyncratic risk," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1245-1269, September.

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