FEEM working papers "Note di lavoro" series
2001 .012

Inflation and Welfare in an OLG Economy with a Privately Provided Public Good


Authors: Sergio Currarini, Gaetano Bloise, Nicholas Kikidis
Series: Economy and Society
Type: Journal
Keywords: Optimal inflation,public goods,voluntary contributions
JEL n.: H41,E52,D91
JEL: Journal of Public Economic Theory
Pages: 4(3)
Date: 2002

Abstract

In this paper we study the welfare effects of monetary policy in a simple overlapping generation economy in which agents voluntarily contribute to a public good. Inflation has two effects at equilibrium: it increases voluntary contributions and it misallocates private consumption across time. We show that the aggregate effect is welfare-improving for "not too large" inflation rates. Moreover, there exists an optimal inflation rate.

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