Dynamic Seigniorage Theory: An Exploration

Maurice Obstfeld

No 519, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper develops a dynamic model of seigniorage in which economies' equilibrium paths reflect the ongoing strategic interaction between an optimizing government and a rational public. The model extends existing positive models of monetary policy and inflation by explicitly incorporating the intertemporal linkages among budget deficits, debt and inflation. A central finding is that the public's rational responses to government policies may well create incentives for the government to reduce inflation and the public debt over time. A sufficiently myopic government may, however, provoke a rising equilibrium path of inflation and public debt.

Keywords: Dynamic Games; Markov Perfect Equilibrium; Seigniorage; Time Consistency (search for similar items in EconPapers)
Date: 1991-03
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Related works:
Working Paper: Dynamic Seigniorage Theory: An Exploration (1997)
Working Paper: Dynamic Seigniorage Theory: An Exploration (1997)
Working Paper: Dynamic Seigniorage Theory: An Exploration (1997)
Working Paper: Dynamic Seigniorage Theory: An Exploration (1989)
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