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Inflation, Welfare, and Public Goods
Author(s) -
Bloise Gaetano,
Currarini Sergio,
Kikidis Nicholas
Publication year - 2002
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/1467-9779.00103
Subject(s) - economics , inflation (cosmology) , welfare , consumption (sociology) , monetary economics , monetary policy , private consumption , overlapping generations model , aggregate (composite) , general equilibrium theory , inflation targeting , public good , macroeconomics , keynesian economics , microeconomics , market economy , fiscal policy , social science , physics , materials science , sociology , theoretical physics , composite material
In this article 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.