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A Price Discrimination Analysis of Monetary Policy

A Price Discrimination Analysis of Monetary Policy Abstract Monetary policy is analysed within a model that appeals to legal restrictions on private intermediation to explain the coexistence of currency and interest-bearing default-free bonds. The interaction between such legal restrictions and monetary policy is illustrated in a version of the overlapping generations model. The model shows that legal restrictions and the use of both currency and bonds permit the government to levy a nonlinear inflation tax and that such a tax may be better in terms of the Pareto criterion than a linear inflation tax. This content is only available as a PDF. Author notes This research was supported by the Federal Reserve Bank of Minneapolis. However, the views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. An earlier and longer version appeared as a Bank Staff Report, Bryant and Wallace (1983). © 1984 The Society for Economic Analysis Limited http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economic Studies Oxford University Press

A Price Discrimination Analysis of Monetary Policy

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References (3)

Publisher
Oxford University Press
Copyright
© 1984 The Society for Economic Analysis Limited
ISSN
0034-6527
eISSN
1467-937X
DOI
10.2307/2297692
Publisher site
See Article on Publisher Site

Abstract

Abstract Monetary policy is analysed within a model that appeals to legal restrictions on private intermediation to explain the coexistence of currency and interest-bearing default-free bonds. The interaction between such legal restrictions and monetary policy is illustrated in a version of the overlapping generations model. The model shows that legal restrictions and the use of both currency and bonds permit the government to levy a nonlinear inflation tax and that such a tax may be better in terms of the Pareto criterion than a linear inflation tax. This content is only available as a PDF. Author notes This research was supported by the Federal Reserve Bank of Minneapolis. However, the views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. An earlier and longer version appeared as a Bank Staff Report, Bryant and Wallace (1983). © 1984 The Society for Economic Analysis Limited

Journal

The Review of Economic StudiesOxford University Press

Published: Apr 1, 1984

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