The money stock, in almost every country in the world, does not contract. This paper attempts a welfare-based explanation for this observation. We study an overlapping generations model with return dominated money. A reserve requirement forces agents to hold money. There is a government that has...

Using a pure-exchange overlapping generations model in which money is valued because of a legal restriction, we show the following: a) a benevolent government may make some use of the inflation tax in conjunction with a lump-sum tax on the young but not if lump-sum taxes on the old are...

Using a pure-exchange overlapping generations model in which money is valued because of a legal restriction, we show the following: a) a benevolent government may make some use of the inflation tax in conjunction with a lump-sum tax on the young but not if lump-sum taxes on the old are...

We present an analysis of how political factors may come into play in the equilibrium determination of inflation. We employ a standard overlapping generations model with heterogenous young-age endowments, and a government that funds an exogenous spending via a combination of non-distortionary...