On ‘Rusting’ Money Silvio Gesell’s Schwundgeld Reconsidered

Günther Rehme

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: Silvio Gesell hypothesized that money depreciation is economically and socially beneficial, ideas that have often been contended. Here I analyze that in a Sidrauski model in which households additionally have a ‘love of wealth’-motive. It is shown Gesell’s claims may be valid in a demand-determined, short-run equilib- rium and why money depreciation overcomes the zero lower bound on nominal interest rates. However, for a typical long-run equilibrium introducing money de- preciation in isolation may be bad. But money depreciation, when coupled with expansionary monetary policy, is a necessary condition for a positive Mundell- Tobin effect on long-run real variables and so creates wealth in the model. It is found that this also holds in the transition to the long-run equilibrium. Hence, the spirit of Gesell’s hypotheses can be verified for a plausible, long-run environment.

Date: 2018-06-25
New Economics Papers: this item is included in nep-hpe, nep-mac and nep-mon
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Published in Darmstadt Discussion Papers in Economics . 233 (2018-06-25)

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Working Paper: On "rusting" money: Silvio Gesell's Schwundgeld reconsidered (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:106303

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