IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v9y2009i1n8.html
   My bibliography  Save this article

Inflation, Self Insurance and the Friedman Rule in Economies with Uninsurable Idiosyncratic Risks

Author

Listed:
  • Roy Sunanda

    (Drake University)

Abstract

The paper studies asset prices and capital accumulation in a monetary economy with non-diversifiable idiosyncratic risks. A government issued unbacked currency is introduced into agent's preferences in a dynamic GEI (General Equilibrium with Incomplete market) model with CARA preferences and normal disturbances. Closed form expressions for equilibrium allocations and prices are derived. The paper identifies two new channels through which money growth affects self insurance, interest rate and capital accumulation. The paper also shows that the resulting non-linearities in the relationships between the rate of inflation, the steady state capital stock and the interest rate, may even cause an optimal rate of inflation not to exist. Further, the Friedman rule is shown to be suboptimal for some economies.

Suggested Citation

  • Roy Sunanda, 2009. "Inflation, Self Insurance and the Friedman Rule in Economies with Uninsurable Idiosyncratic Risks," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-23, March.
    • Handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:8
    DOI: 10.2202/1935-1704.1352
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1935-1704.1352
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1935-1704.1352?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.