Understanding the Roles of Money, or When is the Friedman Rule Optimal, and Why?

Joseph Haslag, Joydeep Bhattacharya and Steven Russell
Additional contact information
Steven Russell: IUPUI

No 301, Working Papers from Department of Economics, University of Missouri

Abstract: In this paper, we study the optimal steady state monetary policy in overlapping generations (OG) models. In contrast to economies populated by inthnitely-lived representative agents (ILRA), the Friedman Rule is frequently not the policy that maximizes the welfare of two-period lived consumers. Our principal goal is to understand why the Friedman Rule is suboptimal in OG economies. To this end, we construct a mechanism.specithcally, a monetary policy regime.that renders money useless in the sense of executing intergenerational transfers. Under this governmental regime, we show that the optimal monetary policy is the Friedman Rule. Our thnding is robust to alternative rationales for valued that money; specithcally, whether money is held voluntarily or involuntarily.

Keywords: Monetary Policy; Friedman Rule; Fiat Money (search for similar items in EconPapers)
JEL-codes: E31 E51 E58 (search for similar items in EconPapers)
Pages: 52 pgs.
Date: 2003-01-08
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://drive.google.com/file/d/1PbECxNrbtiH9WjwbH ... ABN/view?usp=sharing (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:0301

Access Statistics for this paper

More papers in Working Papers from Department of Economics, University of Missouri Contact information at EDIRC.
Bibliographic data for series maintained by Chao Gu ().