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Inflation, Monetary Velocity, and Welfare / Paul R. Krugman, Torsten Persson, Lars E.O. Svensson.
- Format:
- Book
- Author/Creator:
- Krugman, Paul R.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w0987.
- NBER working paper series no. w0987
- Language:
- English
- Subjects (All):
- Circular velocity of money.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1982.
- Cambridge, Mass : National Bureau of Economic Research, 1982.
- Summary:
- This paper develops a simple general equilibrium model of a monetary economy with a capital market, in which monetary demand arises from a "cash-in-advance" constraint rather than from any direct role in the utility function. Uncertainty gives rise to a meaningful portfolio choice between money and bonds. We show that monetary velocity is increasing in the rate of inflation, and that the optimal monetary policy is that which maximizes real balances. We also show that the real rate of interest is not invariant to monetary policy: inflation lowers the real rate.
- Notes:
- Print version record
- September 1982.
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