Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/180662 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
Darmstadt Discussion Papers in Economics No. 233
Publisher: 
Technische Universität Darmstadt, Department of Law and Economics, Darmstadt
Abstract: 
Silvio Gesell hypothesized that money depreciation is economically and socially beneficial, ideas that have often been contended. Here I analyze that in a Sidrauski model in which households additionally have a "love of wealth"-motive. It is shown Gesell's claims may be valid in a demand-determined, short-run equilibrium and why money depreciation overcomes the zero lower bound on nominal interest rates. However, for a typical long-run equilibrium introducing money depreciation in isolation may be bad. But money depreciation, when coupled with expansionary monetary policy, is a necessary condition for a positive Mundell-Tobin effect on long-run real variables and so creates wealth in the model. It is found that this also holds in the transition to the long-run equilibrium. Hence, the spirit of Gesell's hypotheses can be verified for a plausible, long-run environment.
Subjects: 
Economic Performance
Depreciating Money
Zero Lower Bound
Demonetization
Love of Wealth
JEL: 
E1
E5
O4
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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