EFFICIENT MONETARY EQUILIBRIUM - AN OVERLAPPING GENERATIONS MODEL WITH NONSTATIONARY MONETARY POLICIES

This paper is concerned with the characterization of public debt polic ies that are consistent with competitive equilibria in which (i)money is positively priced, and (ii)intertemporal allocation is efficient. T he framework used is an overlapping generations model with many goods, agents with two-period lifetimes, and nonstationary tax-transfer poli cies. We show, under some regularity conditions on such policies that the size of the public debt not growing ''too fast'' is both necessary and sufficient for the existence of an efficient monetary equilibrium . (C) 1994 Academic Press, Inc.