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The Inflation Tax in a Real Business Cycle Model

Thomas F. Cooley and Gary D. Hansen
The American Economic Review
Vol. 79, No. 4 (Sep., 1989), pp. 733-748
Stable URL: http://www.jstor.org/stable/1827929
Page Count: 16
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The Inflation Tax in a Real Business Cycle Model
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Abstract

Money is incorporated into a real business cycle model using a cash-in-advance constraint. The model economy is used to analyze whether the business cycle is different in high inflation and low inflation economies and to analyze the impact of variability in the growth rate of money. In addition, the welfare cost of the inflation tax is measured and the steady-state properties of high and low inflation economies are compared.

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