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Cash-in-advance constraints in the diamond overlapping generations model: neutrality and optimality of monetary policies

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  • CRETTEZ, Bertrand

    ()
    (C.R.E.S.E., Université de Franche-Comté and C.E.M.E., U.R.A. C.N.R.S. DO924, Université de Paris-I)

  • MICHEL, Philippe

    (Université de la Méditerranée II and I.U.F., Greqam)

  • WIGNIOLLE, Bertrand

    ()
    (C.R.E.S.E., Université de Franche-Comté and M.A.D., Université de Paris-I)

Abstract

This paper is a study of money in overlapping generations models with cash-in-advance constraints. We first offer a brief review of different features of the cash-in-advance constraint. Then we propose a general formulation and study the neutrality of money. We show that both neutrality and equilibrium dynamics depend on the form of the cashin-advance constraint. We then show that optimal intergenerational resources sharing can be implemented through monetary transfers. Finally, we find that the Chicago Rule is implied by optimal monetary policy.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1998005.

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Date of creation: 01 Jan 1998
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Handle: RePEc:cor:louvco:1998005

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Keywords: cash-in-advance constraint; monetary policy; superneutrality; overlapping generations model.;

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Cited by:
  1. Leopold von Thadden, 2004. "Active monetary policy, passive fiscal policy and the value of pure debt: some further monetarist arithmetic," Money Macro and Finance (MMF) Research Group Conference 2003 108, Money Macro and Finance Research Group.
  2. Lise Clain-Chamosset-Yvrard & Thomas Seegmuller, 2012. "Rational Bubbles and Macroeconomic Fluctuations. The(De-)Stabilizing Role of Monetary Policy," AMSE Working Papers 1207, Aix-Marseille School of Economics, Marseille, France, revised 23 Mar 2012.
  3. Stefano Bosi, 2005. "Sunspot Bubbles," Documents de recherche 05-25, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  4. MICHEL, Philippe & WIGNIOLLE, Bertrand, 2000. "Temporary bubbles in an economy with under-accumulation," CORE Discussion Papers 2000061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Stefano Bosi & Thomas Seegmuller, 2009. "On Rational Exuberance," Post-Print halshs-00367689, HAL.
  6. Basci, Erdem & Erdogan, Ayse M. & Saglam, Ismail, 2006. "Money, Tobin Effect, and Incerasing Returns," MPRA Paper 1904, University Library of Munich, Germany.
  7. Luciano Fanti, 2012. "Fertility and money in an OLG model," Discussion Papers 2012/145, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  8. Tarishi Matsuoka, 2011. "Temporary Bubbles and Discount Window Policy," KIER Working Papers 802, Kyoto University, Institute of Economic Research.
  9. Firouz Gahvari & Luca Micheletto, 2012. "Monetary Policy and Redistribution: What can or cannot be Neutralized with Mirrleesian Taxes," CESifo Working Paper Series 3711, CESifo Group Munich.
  10. Firouz Gahvari, 2009. "Friedman Rule in a Model with Endogenous Growth and Cash-in-advance Constraint," CESifo Working Paper Series 2708, CESifo Group Munich.
  11. Yanagihara, Mitsuyoshi & Lu, Chen, 2013. "Cash-in-advance constraint, optimal monetary policy, and human capital accumulation," Research in Economics, Elsevier, vol. 67(3), pages 278-288.

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