Sidrauski Monetary Model and Neutrality

Question

In the Sidrausk model, money is in the long run super neutral.
Does this result only apply to the case where money and consumption are separable in the utility function, or also to the case where they are non separable.

LutzHendricks · Answer

The Sidrauski model is equivalent to a model with 2 consumption goods where the second good (money) is produced costlessly by the government. Inflation is equivalent to raising the price of the second good. Money is super-neutral if this does not affect the real allocation (demand for the first good). This only happens when preferences are separable.

Answered by LutzHendricks on June 29, 2021

Sidrauski Monetary Model and Neutrality

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