Monetary and fiscal policies in a general equilibrium model

In the short run, if price expectations are inelastic, the government has full control of the nominal interest rate. While the model is purely competitive, the conclusions are similar to those of the standard IS-LM analysis. In the long run, it is argued that the proper measure of the government def...

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Bibliographic Details
Published in:Journal of economic theory 1986-08, Vol.39 (2), p.329-357
Main Authors: Gagey, F, Laroque, G, Lollivier, S
Format: Article
Language:English
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Summary:In the short run, if price expectations are inelastic, the government has full control of the nominal interest rate. While the model is purely competitive, the conclusions are similar to those of the standard IS-LM analysis. In the long run, it is argued that the proper measure of the government deficit is not the usual one. The interests lost by the money holders because of the transactions constraint must be included as an additional government income, the seignoriage tax.
ISSN:0022-0531
1095-7235
DOI:10.1016/0022-0531(86)90049-9