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Optimal Growth and Disinflation under Incomplete Credit Markets

Author

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  • Alejandro Rodríguez-Arana

    (Universidad Iberoamericana. México, D.F. Mexico)

Abstract

This paper shows that when money is necessary to consume but not to invest a gradual reduction of inflation has a positive effect on output, growth or both. If there is an externality à la Romer, a gradual and permanent disinflation could be optimal from a social point of view. In that case, the consistent monetary policy would be to reduce the growth of the nominal quantity of money also gradually.

Suggested Citation

  • Alejandro Rodríguez-Arana, 2001. "Optimal Growth and Disinflation under Incomplete Credit Markets," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(1), pages 37-58, January-J.
    • Handle: RePEc:emc:ecomex:v:10:y:2001:i:1:p:37-58
    as

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    References listed on IDEAS

    as
    1. Lucas, Robert E, Jr & Stokey, Nancy L, 1987. "Money and Interest in a Cash-in-Advance Economy," Econometrica, Econometric Society, vol. 55(3), pages 491-513, May.
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