This article studies the behavior of the economy and the efficacy of monetary policy under zero nominal interest rates using a model with population growth that nests, as a special case, the conventional specification in which there is a single infinitely lived representative agent. The article shows that with a growing population, monetary policy has distributional consequences that give rise to a real balance effect, thereby eliminating the liquidity trap. These same distributional effects, however, can also work to make many agents much worse off under zero nominal interest rates than they are when the nominal interest rate is positive. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.
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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 46 (2005) Issue (Month): 4 (November) Pages: 1271-1301 Download reference. The following formats are available: HTML
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Weil, Philippe, 1991.
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Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 37-53, February.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Joseph H. Haslag & Joydeep Bhattacharya & Antoine Martin & Rajesh Singh, 2004.
"Who is Afraid of the Friedman Rule?,"
Working Papers
0421, Department of Economics, University of Missouri, revised 21 Dec 2004.
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Joydeep Bhattacharya & Joseph Haslag & Antoine Martin & Rajesh Singh, 2008.
"Who Is Afraid Of The Friedman Rule?,"
Economic Inquiry,
Western Economic Association International, vol. 46(2), pages 113-130, 04.
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