Money

Toshihiro Ihori
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Toshihiro Ihori: University of Tokyo

Chapter 7 in Public Finance in an Overlapping Generations Economy, 1996, pp 144-175 from Palgrave Macmillan

Abstract: Abstract This chapter introduces money into the basic model. There are two views of money. In the ‘bubbly’ view, money is a pure store of value. This view implies that price of money grows at the real rate of interest and that money is held entirely for speculation. In the ‘fundamentalist’ view money is held to finance transactions. Only the fundamentalist view can explain the rate of return dominance of other assets over money. Samuelson (1958) first introduced money into the overlapping generations model. Section 2 summarizes his framework without capital accumulation1 and explains the bubbly view of money. We also introduce money into the Diamond model with capital accumulation and explain the fundamentalist view of money by examining the dynamic properties of the economy as well as its steady state nature.

Keywords: Capital Accumulation; Welfare Cost; Partial Indexation; Overlap Generation Model; Money Holding (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-38990-8_7

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DOI: 10.1057/9780230389908_7

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