In a neoclassical growth model with life-cycle households in which money is held to satisfy a cash-in-advance constraint, the optimal steady state inflation rate is not the Friedman rule -- it is in excess of $20\%$. Lump-sum, age-independent money injections twist and flatten the lifetime...

In macroeconomics, life-cycle models are typically used to address exclusively life-cycle issues. This paper shows that modeling the life-cycle may be important when addressing public policy issues, in this case the welfare costs of inflation. In the representative agent model, the optimal...