Optimal inflation in a model of inside money

Alexei Deviatov () and Neil Wallace ()

Review of Economic Dynamics, 2014, vol. 17, issue 2, 287-293

Abstract: There are several models of outside money in which some inflation accomplished through lump-sum transfers is optimal. It is shown here that inflation can be optimal in a model of inside money, essentially the model in Cavalcanti-Wallace (1999). The possibility of inflation comes about via the trades between people who can issue inside money, monitored people, and those who cannot, nonmonitored people. Inflation occurs at the optimum if the monitored people spend more in such meetings when they are buyers than they receive in such meetings when they are sellers. (Copyright: Elsevier)

Keywords: Inside-money; Inflation; Monitoring; Optima (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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DOI: 10.1016/j.red.2013.06.003

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