Article ID Journal Published Year Pages File Type
5058395 Economics Letters 2016 4 Pages PDF
Abstract

•We consider a perpetual youth model in which real balances provide utility.•Dynamic efficiency is consistent with a positive inflation rate.•The higher inflation, the larger is the bubble required to restore efficiency.

We consider a perpetual youth model in which real balances are an argument of the utility function. We show that dynamic efficiency is compatible with a positive inflation rate, and that the higher inflation, the larger is the size of the bubble required to remove the inefficiency.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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