Can a Policy of Higher Inflation Reduce Real Interests in the Long Run?
This paper describes a simple general equilibrium model in which a permanent easing of monetary policy, engineered via open market purchases, may produce a permanent decrease in the real interest rate and a permanent increase in the inflation rate. Under somewhat stronger assumptions, the nominal interest rate may also decline.
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Volume (Year): 31 (1998)
Issue (Month): 1 (February)
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