Essential Interest-Bearing Money
AbstractI examine a version of the Lagos and Wright (2005) monetary model where coercive lump-sum taxation is infeasible. Despite this restriction, I demonstrate that the first-best allocation remains implementable under an appropriately designed monetary policy; at least, if agents are sufficiently patient. The main conclusion is that any incentive-feasible monetary policy necessarily requires a strictly positive nominal interest rate to be paid on money balances.
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Bibliographic InfoPaper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 0802.
Length: 16 pages
Date of creation: 2008
Date of revision: Oct 2008
Other versions of this item:
- Andolfatto, David, 2007. "Essential Interest-Bearing Money," MPRA Paper 4780, University Library of Munich, Germany.
- David Andolfatto, 2007. "Essential Interest-Bearing Money," Discussion Papers dp07-16, Department of Economics, Simon Fraser University.
- 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
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