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A Simple General Equilibrium Version of the Baumol-Tobin Model

David Romer

Princeton University

This paper presents a simple general equilibrium model that includes optimizing choices of the frequency of trips to the bank. The model is used to analyze the effect of inflation on the capital stock, the interest elasticity of money demand, the optimum quantity of money, and the welfare costs of inflationary finance.

DOI

10.2307/1884173

Volume

101 (4)

Pages

663

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