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"Gesell Tax" and Efficiency of Monetary Exchange

  • Martin Menner

    (Universidad de Alicante)

A periodic "Gesell Tax" on money holdings as a way to overcome the zero-lower-bound on nominal interest rates is studied in a framework where money is essential. For this purpose, I characterize the efficiency properties of taxing money in a full-fledged macroeconomic business cycle model of the third-generation of monetary search models. Both, inflation and "Gesell taxes" maximize steady state capital stock, output, consumption, investment and welfare at moderate levels. The Friedman rule is sub-optimal, unless accompanied by a moderate “Gesell tax”. In a recession scenario a Gesell tax speeds up the recovery in a similar way as a large fiscal stimulus but avoids "crowding out" of private consumption and investment.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2011-26.pdf
File Function: Fisrt version / Primera version, 2011
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2011-26.

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Length: 44 pages
Date of creation: Dec 2011
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2011-26
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