-maximizing levels. In effect, a small stock of debt combined with restrictions on a central bank’s portfolio can put the economy on the … inflation rates implied by a decline in the stock of government debt outstanding. Unless the economy is on the Pareto inferior …

economy with three assets—currency, government bonds, and storage, a transactions role for money, and a demand for liquidity … and thus a role for banks. The Friedman rule is not optimal in this economy, so there is potentially a role for interest … is a primary government budget deficit, and the economy is operating on the bad side of the Laffer curve. But under these …

rule) in one regime is not sufficient to insulate the economy against tax shocks in that regime and it can have the …

allocation in the economy with inside bonds can be replicated in the economy with outside bonds but that the converse is not true …. However, the optimal policy in each economy makes the allocations equivalent. -- liquidity ; financial markets ; monetary …