Creator: Gomme, Paul, 1961- Series: Economic growth and development Abstract:
Results in Lucas (1987) suggest that if public policy can affect the growth rate of the economy, the welfare implications of alternative policies will be large. In this paper, a stochastic, dynamic general equilibrium model with endogenous growth and money is examined. In this setting, inflation lowers growth through its effect on the return to work. However, the welfare costs of higher inflation are extremely modest.
Subject (JEL): E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation and O42 - Economic growth and aggregate productivity - Monetary growth models