Monetary non-neutrality in the Sidrauski model under uncertainty

Abraham Lioui and Patrice Poncet

Economics Letters, 2008, vol. 100, issue 1, pages 22-26

Abstract: Introducing uncertainty in the Reis's [Reis, R., 2007, The analytics of monetary non-neutrality in the Sidrauski model, Economics Letters 94 (1), 129-135] version of the Sidrauski model leads to a monetary policy that is not super-neutral even though money and consumption are separable in the utility function. This is because the real interest rate is affected by such a policy. Only in the case of an interest rate inelastic money demand does the super-neutrality result survive.

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