Chapter 11The Inflation Tax in a Real Business Cycle Model
American Economic Review 79(4), September 1989, pp. 7 33-748
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.
Current controversies in business cycle theory have much in common with the macroeconomic debates of the 1960s. Twenty years ago Milton Friedman and Walter Heller ...
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