Dynamic Seigniorage Theory: An Exploration

This paper develops a dynamic model of seigniorage in which economies' equilibrium paths reflect the ongoing strategic interaction between an optimizing government and a rational public. The model extends existing positive models of monetary policy and inflation by explicitly incorporating the intertemporal linkages among budget deficits, debt, and inflation. A central finding is that the public's rational responses to government policies may well create incentives for the government to reduce inflation and the public debt over time. A sufficiently myopic government may, however, provoke a rising equilibrium path of inflation and public debt.


Issue Date:
1997-03
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/233606
Total Pages:
55
JEL Codes:
E31; E63; C73
Series Statement:
Working Paper
C97-085




 Record created 2017-04-01, last modified 2017-08-29

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