The inflation tax in a convex model of equilibrium growth

M. H. Marquis, K. L. Reffett

Research output: Contribution to journalArticle

13 Scopus citations

Abstract

A general equilibrium monetary economy is described that exhibits equilibrium growth. The production technology is consistent with Holes and Manuelli (1990) and Rebelo (1991). The inflation tax and nominal interest rates are shown to be inversely related to the equilibrium growth rates of real variables until a critical point is reached. At this point, equilibrium growth is eliminated and the predictions of Stockman (1981) and Abel (1985) concerning the "level effects' of distortionary monetary policies appear. For the nominal side of the model, a version of the prediction of Friedman (1969) is shown to hold for a particular balanced growth path. Following King and Rebelo (1990), a linear growth version of the model is calibrated to illustrate the potentially large growth and welfare effects of moderate inflations. -Authors

Original languageEnglish (US)
Pages (from-to)109-121
Number of pages13
JournalEconomica
Volume62
Issue number245
DOIs
StatePublished - Jan 1 1995
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'The inflation tax in a convex model of equilibrium growth'. Together they form a unique fingerprint.

  • Cite this