On the Optimality of Restricting Credit: Inflation Avoidance and Productivity

Gillman, Max 2000. On the Optimality of Restricting Credit: Inflation Avoidance and Productivity. The Japanese Economic Review 51 (3) , pp. 375-390. 10.1111/1468-5876.00158

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Abstract

The paper presents a model in which the consumer uses up resources in order to avoid the inflation tax through the use of exchange credit. In an example economy without capital, the credit tax is optimal when the resource loss from credit use dominates the productivity effect and the inefficiency of substitution towards leisure as a result of the credit tax. The paper also examines second-best inflation policy in this context, given a credit tax. It then extends the economy to an endogenous growth setting and shows how restricting inflation avoidance can increase productivity.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce H Social Sciences > HG Finance H Social Sciences > HJ Public Finance
Publisher:	Wiley Blackwell
ISSN:	1352-4739
Last Modified:	19 Mar 2016 23:09
URI:	https://orca.cardiff.ac.uk/id/eprint/41093

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