RIVALROUS MONEY SUPPLY AMONG OVERLAPPING GENERATIONS

This note explores endogenous rivalrous money supply by different gene rations of an overlapping generations economy. Money (gold) is intrins ically useless, but is costly to create. We show how a government repr esenting the young has an incentive to tax its constituency to mine go ld to redistribute among the young in order to inflate the aggregate m oney stock and thereby reduce the value of the money holdings of the o ld. This additional money also reduces the inflationary impact of the money creation by the succeeding generation. Equilibrium dynamics of p rices and consumption are explored.