The Optimum Quantity of Money: Theory and Evidence

Journal of Money, Credit, and Banking (November 1997)

Posted: 22 Feb 1998

See all articles by Casey B. Mulligan

Casey B. Mulligan

University of Chicago; National Bureau of Economic Research (NBER)

Xavier Sala-i-Martin

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Multiple version iconThere are 3 versions of this paper

Abstract

Our model for computing the Ramsey optimal inflation tax includes several models from the previous literature as special cases. The model highlights the various assumptions in that literature which have led to such different results, assumptions which relate to the interest and scale elasticities of money demand and how they vary with the interest rate, whether money is required to pay taxes, and the nature of transactions when interest rates are very low. Calibrating the model to a variety of empirical studies yields an optimal nominal interest rate of less than 1%/year, although that finding is sensitive to the calibration.

JEL Classification: E52, E61, E63.

Suggested Citation

Mulligan, Casey B. and Sala-i-Martin, Francesc Xavier, The Optimum Quantity of Money: Theory and Evidence. Journal of Money, Credit, and Banking (November 1997). Available at SSRN: https://ssrn.com/abstract=61396

Casey B. Mulligan (Contact Author)

University of Chicago ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-9017 (Phone)
773-702-8490 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Francesc Xavier Sala-i-Martin

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States
212-854-7055 (Phone)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
586
PlumX Metrics