On the Optimal Inflation Rate
在不完全市场模型中，家庭选择风险资本和货币的组合，货币作为泡沫存在。适度通胀通过降低货币实际利率，引导投资转向实物资本，从而提升增长率和福利。
In our incomplete markets economy households choose portfolios consisting of risky (uninsurable) capital and money. Money is a bubble, it has positive value even though it yields no payoff. The market outcome is constrained Pareto inefficient due to a pecuniary externality. Each individual agent takes the real interest rate as given, while in the aggregate it is driven by the economic growth rate, which in turn depends on individual portfolio decisions. Higher inflation due to higher money growth lowers the real interest rate on money and tilts the portfolio choice towards physical capital investment. Modest inflation boosts growth rate and welfare.