A price discrimination analysis of monetary policy

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A price discrimination analysis of monetary policy

Author Info

John Bryant
Neil Wallace

Abstract

Monetary policy is analyzed within a model that ignores transaction costs and appeals solely to legal restrictions on private intermediation to explain the coexistence of currency and interest-bearing default-free bonds. The interaction between such legal restrictions and monetary policy is illustrated in versions of overlapping generations models that contain three assets: government-issued currency and bonds and real capital. It is shown that legal restrictions and the use of both currency and bonds permit the government to levy a discriminatory inflation tax and that such a tax may be better in terms of the Pareto criterion than a uniform inflation tax.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 51.

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Date of creation: 1983
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Handle: RePEc:fip:fedmsr:51

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This paper has been announced in the following NEP Reports:

NEP-ALL-2002-03-14 (All new papers)
NEP-CBA-2002-03-14 (Central Banking)
NEP-MON-2002-03-14 (Monetary Economics)

References listed on IDEAS
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.:

Sargent, Thomas J & Wallace, Neil, 1982. "The Real-Bills Doctrine versus the Quantity Theory: A Reconsideration," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1212-36, December. [Downloadable!] (restricted)
Bryant, John & Wallace, Neil, 1979. "The Inefficiency of Interest-bearing National Debt," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 365-81, April. [Downloadable!] (restricted)
Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 39-57, January. [Downloadable!] (restricted)

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(explanations, 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.)

Neil Wallace, 1983. "A legal restrictions theory of the demand for "money" and the role of monetary policy," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win. [Downloadable!]

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