Implementing the Friedman rule
AbstractIn cash-in-advance models, necessary and sufficient conditions for the existence of an equilibrium with zero nominal interest rates and Pareto-optimal allocations restrict only the very long-run, or asymptotic, behavior of the money supply. When these asymptotic conditions are satisfied, they leave the central bank with a great deal of flexibility to manage the money supply over any finite horizon. But what happens when these asymptotic conditions fail to hold? This paper shows that the central bank can still implement the Friedman rule if its actions are appropriately constrained in the short run.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0012.
Date of creation: 2000
Date of revision:
Other versions of this item:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-10-05 (All new papers)
- NEP-DGE-2000-10-05 (Dynamic General Equilibrium)
- NEP-MON-2000-10-05 (Monetary Economics)
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