Another Example in which Lump-sum Money Creation is Beneficial
- 27 February 2001
- journal article
- Published by Walter de Gruyter GmbH in The B.E. Journal of Macroeconomics
- Vol. 1 (1)
- https://doi.org/10.2202/1534-6013.1001
Abstract
A probabilistic version of lump-sum money creation is studied in a random matching model with indivisible money and individual holdings bounded at 2 units. Sufficient conditions are obtained for an ex ante optimum from among implementable steady states to involve lump-sum creation of money. The role of that creation is to change the distribution of money holdings to permit more trade to occur. Beneficial money creation is impossible in a version with a 1 unit upper bound on individual holdings, but can almost certainly happen for all higher bounds.Keywords
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