Further reflections on money

Abstract

In reviewing the literature on the superneutrality issue in chapter 1, we have exclusively focused on the ’money-taxing aspects of inflation’. However, in the light of the empirical evidence given in the previous chapter this has been an unduly narrow perspective and, therefore, we turn now to a broader discussion of the issue. First, we discuss additional channels through which sustained inflation impacts on the economy. Second, we argue that despite the striking variety of results in monetary growth theory there has emerged a solid consensus among economists, as far as ‘essential’ features of money are concerned that need to be addressed in a rigorous way. Referring to these ‘essentials’, we discuss some consequences for monetary theory in general and present a broad classification of ongoing research. Third, drawing on this classification, we introduce the second part of the book. In particular, we argue that Diamond’s version of an overlapping generation’s economy with production may well serve as a benchmark model to discuss a broad range of aspects related to the question whether one should expect money to be superneutral.