Seigniorage in a neoclassical economy
Subtitle: some computational results
By: Joydeep Bhattacharya and Joseph H. Haslag.
Contributors: Haslag, Joseph H.
Series: Research Department working paper ;; 9901; Working paper (Federal Reserve Bank of Dallas. Research Dept. : Online) ;; 9901.
Publisher: Federal Reserve Bank of Dallas
Published: 1999
Place of publication: [Dallas, Tx.]
Language: eng
Format: Electronic resource
Subjects: Seigniorage.
Description: "In this paper, we consider a government that executes a permanent open market sale. The government is forced to eventually use money creation to pay for the debt's expenses, choosing between changing either the money growth rate (the inflation-tax rate) or the reserve requirement ratio (the inflation-tax base). We first derive conditions under which each of the two second-best alternative policies are feasible in an economy with neoclassical production. Armed with these conditions, we ask the following question: Which monetary policy action is better in a welfare sense? With neoclassical production, monetary policy potentially has long-run effects on the capital stock and the marginal product of capital. The curvature of the production function is crucial. The computational experiments show, somewhat surprisingly, that a permanent increase in government bonds is financed by either lower reserve requirements or faster money growth. Accordingly, steady-state welfare for all generations is higher under the reserve-requirement policy. "--Federal Reserve Bank of Dallas web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/27/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.