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Optimality of the Friedman Rule in an Overlapping Generations Model with Spatial Separation Author info | Abstract | Publisher info | Download info | Related research | Statistics JOSEPH H. HASLAG
ANTOINE MARTIN
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Recent models with spatial separation and limited communication suggest that the Friedman rule may not be optimal. This is important in light of the disparity between theory and practice concerning optimal monetary policy. We take a close look at these models and show that intergenerational transfers are key to the suboptimality of the Friedman rule. The Friedman rule is a necessary condition for achieving the efficient allocation in equilibrium. We also show that the Friedman rule is chosen whenever agents can implement mutually beneficial arrangements. Copyright 2007 The Ohio State University.
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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking .
Volume (Year): 39 (2007)
Issue (Month): 7 (October)
Pages: 1741-1758
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Handle: RePEc:mcb:jmoncb:v:39:y:2007:i:7:p:1741-1758Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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281, Federal Reserve Bank of New York.
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Bhattacharya, Joydeep & Haslag, Joseph & Martin, Antoine, 2007.
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[Downloadable!] Joseph H. Haslag & Joydeep Bhattacharya & Antoine Martin, 2007.
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