Optimal Portfolio and Savings Decisions in an Intergenerational Economy

John E Leach

International Economic Review, 1987, vol. 28, issue 1, 123-34

Abstract: An intergenerational economy in which transactions costs cause agents to diversify their portfolios is presented. Changes in the rate of monetary expansion lead to changes in the velocity of money. Earlier intergenerational models introduced this relationship in an ad hoc fashion by assuming that money yields direct utility. The comparative statics of this model are significantly different from those of its predecessors. Greater inflation can lead to either a greater or a smaller capital intensity. The capital intensity corresponding to a constant money supply can be greater than, equal to, or less than the golden rule capital intensity. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1987
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