Abstract
Monetary policy is analysed within a model that appeals 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 a version of the overlapping generations model. The model shows that legal restrictions and the use of both currency and bonds permit the government to levy a nonlinear inflation tax and that such a tax may be better in terms of the Pareto criterion than a linear inflation tax.
Original language | English (US) |
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Pages (from-to) | 279-288 |
Number of pages | 10 |
Journal | Review of Economic Studies |
Volume | 51 |
Issue number | 2 |
DOIs | |
State | Published - Apr 1984 |
All Science Journal Classification (ASJC) codes
- Economics and Econometrics