The optimal rate of money creation in an overlapping generations model: numerical simulations for the U.S. economy
International Monetary Fund, 1992 - Business & Economics - 37 pages
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Dynamic Adjustment following a Permanent Increase in
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Auerbach and Kotlikoff baseline scenario Ml budget constraint calibration capital stock consumption and money cost of holding deadweight loss demand for money dynamic economy's efficient policy elasticity of substitution equivalent variation measure Euler equations factor prices holding money implementing Friedman's rule income effect individual born individual's lifetime resources interest elasticity intergenerational intertemporal elasticity levels of consumption marginal maximizing inflation rate methodology monetary balances money creation money to output money-output ratio nominal interest rate nominal money Notice obtained optimal inflation rate optimal rate optimality criterion original steady output ratio Overlapping Generations Model parameter Pareto efficient permanent increase policy change price equation price level rate of inflation rate of money real assets real interest rate reduction relevant monetary aggregate representative individual result simulation social discount rate steady state lifetime steady state welfare Tobin effect transition U.S. economy utility function value of money welfare cost welfare maximizing inflation zero