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On the Optimal Inflation Rate

Author(s): Brunnermeier, Markus K; Sannikov, Yuliy

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dc.contributor.authorBrunnermeier, Markus K-
dc.contributor.authorSannikov, Yuliy-
dc.date.accessioned2019-10-29T14:36:44Z-
dc.date.available2019-10-29T14:36:44Z-
dc.date.issued2016-05en_US
dc.identifier.citationBrunnermeier, Markus K, Sannikov, Yuliy. (2016). On the Optimal Inflation Rate. American Economic Review, 106 (5), 484 - 489. doi:10.1257/aer.p20161076en_US
dc.identifier.issn0002-8282-
dc.identifier.urihttp://arks.princeton.edu/ark:/88435/pr1846g-
dc.description.abstractIn our incomplete markets economy households choose portfolios consisting of risky (uninsurable) capital and money. Money is a bubble, it has positive value even though it yields no payoff. The market outcome is constrained Pareto inefficient due to a pecuniary externality. Each individual agent takes the real interest rate as given, while in the aggregate it is driven by the economic growth rate, which in turn depends on individual portfolio decisions. Higher inflation due to higher money growth lowers the real interest rate on money and tilts the portfolio choice towards physical capital investment. Modest inflation boosts growth rate and welfare.en_US
dc.format.extent484 - 489en_US
dc.language.isoenen_US
dc.relation.ispartofAmerican Economic Reviewen_US
dc.rightsFinal published version. Article is made available in OAR by the publisher's permission or policy.en_US
dc.titleOn the Optimal Inflation Rateen_US
dc.typeJournal Articleen_US
dc.identifier.doidoi:10.1257/aer.p20161076-
pu.type.symplectichttp://www.symplectic.co.uk/publications/atom-terms/1.0/conference-proceedingen_US

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