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MONEY AND NOMINAL BONDS

Published online by Cambridge University Press:  01 April 2009

Alessandro Marchesiani
Affiliation:
University of Naples L'Orientale
Pietro Senesi*
Affiliation:
University of Naples L'Orientale
*
Address correspondence to: Pietro Senesi, Department of Social Science, University of Naples L'Orientale, Largo S. Giovanni Maggiore, 30, 80134 Naples, Italy; e-mail: [email protected].

Abstract

This paper studies an economy with ex post heterogeneity and nominal bonds in a model à la Lagos and Wright (2005). It is shown that a strictly positive interest rate is a sufficient condition for the allocation with nominal bonds to be welfare-improving. This result comes from protection against the inflation tax.

Type
Articles
Copyright
Copyright © Cambridge University Press 2009

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