Optimal Growth and Disinflation under Incomplete Credit Markets

Alejandro Rodríguez-Arana
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Alejandro Rodríguez-Arana: Universidad Iberoamericana. México, D.F. Mexico
Authors registered in the RePEc Author Service: Alejandro Rodríguez Arana

Economía Mexicana NUEVA ÉPOCA, 2001, vol. X, issue 1, 37-58

Abstract: This paper shows that when money is necessary to consume but not to invest a gradual reduction of inflation has a positive effect on output, growth or both. If there is an externality à la Romer, a gradual and permanent disinflation could be optimal from a social point of view. In that case, the consistent monetary policy would be to reduce the growth of the nominal quantity of money also gradually.

Date: 2001
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