TY - JOUR
AU - Abel,Andrew B.
TI - Optimal Monetary Growth
JF - National Bureau of Economic Research Working Paper Series
VL - No. 2136
PY - 1987
Y2 - 1987
DO - 10.3386/w2136
UR - http://www.nber.org/papers/w2136
L1 - http://www.nber.org/papers/w2136.pdf
N1 - Author contact info:
Andrew B. Abel
The Wharton School
University of Pennsylvania
2315 Steinberg Hall - Dietrich Hall
Philadelphia, PA 19104-6367
Tel: 215/898-4801
Fax: 215/573-7244
E-Mail: abel@wharton.upenn.edu
AB - In the absence of monetary superneutrality, inflation affects capital accumulation and the demand for real balances. This paper derives the combination of monetary and lump-sum fiscal policy which maximizes the sum of discounted utilities of representative consumers in present and future generations. Under the optimal policy package, the steady state has a zero nominal interest rate and has monetary contraction at the rate of intergenerational discount. As the rate of intergenerational discount rate approaches zero, optimal policy maximizes steady state utility of the representative consumer. In this case, the optimal steady state is characterized by a constant nominal money supply.
ER -