Sub-optimality of the Friedman rule in Townsend's turnpike and stochastic relocation models of money: Do finite lives and initial dates matter?
The Friedman rule, a widely studied prescription for monetary policy, is optimal in Townsend's turnpike model of money; it is not so in the overlapping generations version of his stochastic relocation model of money. We investigate these monetary models in the light of this disparity. To that end, we create a modified version of the turnpike model that generates the same stationary monetary equilibria as does the two-period overlapping generations model with random relocation. We exploit this equivalence to explain the aforementioned disparity. We also discuss the importance of whether or not the economy has an initial date.
(This abstract was borrowed from another version of this item.)
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.:
- Correia, Isabel & Teles, Pedro, 1996.
"Is the Friedman Rule Optimal When Money is an Intermediate Good?,"
CEPR Discussion Papers
1287, C.E.P.R. Discussion Papers.
- Correia, Isabel & Teles, Pedro, 1996. "Is the Friedman rule optimal when money is an intermediate good?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 223-244, October.
- Stacey L. Schreft & Bruce D. Smith, 1994.
"Money, banking, and capital formation,"
94-05, Federal Reserve Bank of Richmond.
- Joseph H. Haslag & Antoine Martin, 2003.
"Optimality of the Friedman rule in overlapping generations model with spatial separation,"
Research Working Paper
RWP 03-03, Federal Reserve Bank of Kansas City.
- Joe Haslag & Antoine Martin, 2003. "Optimality of the Friedman Rule in Overlapping Generations Model with Spatial Separation," Working Papers 0306, Department of Economics, University of Missouri.
- Joe Haslag & Joydeep Bhattacharya & Steven Russell, 2003. "Understanding the Roles of Money, or When is the Friedman Rule Optimal, and Why?," Working Papers 0301, Department of Economics, University of Missouri.
- Joydeep Bhattacharya & Joseph H. Haslag & Antoine Martin, 2005.
"Heterogeneity, Redistribution, And The Friedman Rule,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 437-454, 05.
- Joydeep Bhattacharya & Joseph H. Haslag & Antoine Martin, 2004. "Heterogeneity, redistribution, and the Friedman rule," Research Working Paper RWP 04-01, Federal Reserve Bank of Kansas City.
- Bhattacharya, Joydeep & Haslag, Joseph & Martin, Antoine, 2004. "Heterogeneity, Redistribution, and the Friedman Rule," Staff General Research Papers 11371, Iowa State University, Department of Economics.
- Gahvari, Firouz, 1988. "Lump-sum taxation and the superneutrality and optimum quantity of money in life cycle growth models," Journal of Public Economics, Elsevier, vol. 36(3), pages 339-367, August.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:30:y:2006:i:5:p:879-897. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.