An argument for positive nominal interest

Gaetano Bloise and Herakles Polemarchakis

No 269721, Economic Research Papers from University of Warwick - Department of Economics

Abstract: In a dynamic economy, money provides liquidity as a medium of exchange. A central bank that sets the nominal rate of interest and distributes its profit to shareholders as dividends is traded in the asset market. A nominal rates of interest that tend to zero, but do not vanish, eliminate equilibrium allocations that do not converge to a Pareto optimal allocation.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 26
Date: 2015-12-30
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269721

DOI: 10.22004/ag.econ.269721

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