Review of Economic Studies Vol. 51 No. 2 1984

A Price Discrimination Analysis of Monetary Policy

John Bryant¹; Neil Wallace^2,3

¹ Rice University · ² University of Minnesota · ³ University of Minnesota System

Abstract

Monetary policy is analysed within a model that appeals to legal restrictions on private intermediation to explain the coexistence of currency and interest-bearing default-free bonds. The interaction between such legal restrictions and monetary policy is illustrated in a version of the overlapping generations model. The model shows that legal restrictions and the use of both currency and bonds permit the government to levy a nonlinear inflation tax and that such a tax may be better in terms of the Pareto criterion than a linear inflation tax.

DOI

10.2307/2297692

Volume

51

Issue

2

Pages

279

Sources

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Cite

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