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has been cited by the following article:
TITLE: Dynamic Inconsistency and the Seignorage Paradox
AUTHORS: Fernando Perera-Tallo
KEYWORDS: Seignorage, Dynamic Inconsistency, Monetary Policy
JOURNAL NAME: Theoretical Economics Letters, Vol.5 No.6, December 8, 2015
ABSTRACT: Why do governments that pursue seignorage set growth rates of money that exceeds the one that maximizes it? This paper presents a Keynesian model with a government that pursues seignorage but dislikes inflation. Dynamic inconsistency problems prevent the implementation of the optimal growth rate of money and even the existence of stationary equilibrium. When stationary equilibrium exists, it is multiple and the growth rate of money is larger than the one that maximizes seignorage in some or even all equilibria.