Optimal Monetary Growth
AbstractIn the absence of monetary superneutrality, inflation affects capital accumulation and the demand for real balances. This paper derives the combination of monetary and lump-sum fiscal policy which maximizes the sum of discounted utilities of representative consumers in present and future generations. Under the optimal policy package, the steady state has a zero nominal interest rate and has monetary contraction at the rate of intergenerational discount. As the rate of intergenerational discount rate approaches zero, optimal policy maximizes steady state utility of the representative consumer. In this case, the optimal steady state is characterized by a constant nominal money supply.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2136.
Date of creation: Jan 1987
Date of revision:
Publication status: published as Abel, Andrew B. "Optimal Monetary Growth," Journal of Monetary Economics, Vol. 19, No. 3, May 1987, pp 437-450.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
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Other versions of this item:
- Andrew B. Abel, . "Optimal Monetary Growth," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 02-87, Wharton School Rodney L. White Center for Financial Research.
- Andrew B. Abel, . "Optimal Monetary Growth," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 2-87, Wharton School Rodney L. White Center for Financial Research.
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