An overlapping generations model for monetary policy analysis

Samuel Huber () and Jaehong Kim

European Economic Review, 2020, vol. 125, issue C

Abstract: We integrate an overlapping generations structure into the standard Lagos and Wright (2005) framework and show that mild inflation can be welfare-improving. The reason behind this result is that inflation induces young agents to reduce their savings and to increase their consumption, which overpowers the utility loss of old agents. However, the beneficial effect disappears for higher inflation rates, such that the optimal inflation rate is one at an intermediate level.

Keywords: Overlapping generations; Monetary theory; Friedman rule (search for similar items in EconPapers)
JEL-codes: D90 E31 E41 E50 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: An overlapping generations model for monetary policy analysis (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:125:y:2020:i:c:s0014292120300611

DOI: 10.1016/j.euroecorev.2020.103429

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