The welfare effects of alternative monetary arrangements are computed for an economy calibrated to U.S. data. In the model world, people vary their holdings of liquid assets in order to smooth their consumption. In such worlds, we find that the feature of an arrangement that matters is the equilibrium after-tax real return on savings. We also find that relative to a tax on labor income, seigniorage is a poor source of revenue.
This is an edited version of a paper that was prepared for a November 1990 conference sponsored by the Federal Reserve Bank of Cleveland and published in a special issue of the _Journal of Money, Credit, and Banking_ (August 1991, part 2, vol. 23, no. 6, pp. 462-475). The paper appears here with the permission of the Federal Reserve Bank of Cleveland. All rights reserved.