This paper provides a coherent framework of endogenous growth and overlapping generations with money in the utility function and inelastic labor supply. Monetary growth permanently affects real growth. An increase in monetary growth then no longer leads to an identical increase in inflation,and also money is no longer the sole determinant of inflation in the long run. We also show that increases in public debt and public consumption damage growth prospects and thus increase inflation even when accompanied by increases in lump-sum taxes and a constant rate of growth of the nominal money supply.
Journal of Money, Credit and Banking (with Rick van der Ploeg)