IDEAS home Printed from https://ideas.repec.org/a/lus/reveco/v66y2015i3p289-302.html
   My bibliography  Save this article

Superneutrality of Money under Open Market Operations

Author

Listed:
  • Homburg Stefan

    (School of Economics and Management, Leibniz University of Hannover, Hannover, Germany)

Abstract

Monetary policy is superneutral in an overlapping generations model. Previous authors have argued that superneutrality does not hold in such a setting. However, the standard results rely on the counter-factual premise of helicopter money and are overturned if money creation through open market operations is taken into account. This result suggests that a more realistic representation of monetary policy may generally be helpful.

Suggested Citation

  • Homburg Stefan, 2015. "Superneutrality of Money under Open Market Operations," Review of Economics, De Gruyter, vol. 66(3), pages 289-302, December.
    • Handle: RePEc:lus:reveco:v:66:y:2015:i:3:p:289-302
    DOI: 10.1515/roe-2015-1003
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/roe-2015-1003
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/roe-2015-1003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fischer, Stanley, 1979. "Capital Accumulation on the Transition Path in a Monetary Optimizing Model," Econometrica, Econometric Society, vol. 47(6), pages 1433-1439, November.
    2. Bhattacharya, Joydeep & Haslag, Joseph & Russell, Steven, 2005. "The role of money in two alternative models: When is the Friedman rule optimal, and why?," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1401-1433, November.
    3. Abel, Andrew B., 1987. "Optimal monetary growth," Journal of Monetary Economics, Elsevier, vol. 19(3), pages 437-450, May.
    4. Homburg, Stefan, 1990. "The Efficiency of Unfunded Pension Schemes," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 146, pages 640-647.
    5. Crettez, Bertrand & Michel, Philippe & Wigniolle, Bertrand, 1999. "Cash-in-Advance Constraints in the Diamond Overlapping Generations Model: Neutrality and Optimality of Monetary Policies," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 431-452, July.
    6. Thomas J. Sargent & Neil Wallace, 1984. "Some Unpleasant Monetarist Arithmetic," Palgrave Macmillan Books, in: Brian Griffiths & Geoffrey E. Wood (ed.), Monetarism in the United Kingdom, pages 15-41, Palgrave Macmillan.
    7. Weiss, Laurence M, 1980. "The Effects of Money Supply on Economic Welfare in the Steady State," Econometrica, Econometric Society, vol. 48(3), pages 565-576, April.
    8. Drazen, Allan, 1981. "Inflation and capital accumulation under a finite horizon," Journal of Monetary Economics, Elsevier, vol. 8(2), pages 247-260.
    9. Breyer, Friedrich & Straub, Martin, 1993. "Welfare effects of unfunded pension systems when labor supply is endogenous," Journal of Public Economics, Elsevier, vol. 50(1), pages 77-91, January.
    10. Peter N. Ireland, 2005. "The Liquidity Trap, The Real Balance Effect, 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(4), pages 1271-1301, November.
    11. Wallace, Neil, 1981. "A Modigliani-Miller Theorem for Open-Market Operations," American Economic Review, American Economic Association, vol. 71(3), pages 267-274, June.
    12. Feldstein, Martin S, 1976. "Social Security and Saving: The Extended Life Cycle Theory," American Economic Review, American Economic Association, vol. 66(2), pages 77-86, May.
    13. Gahvari, Firouz, 2007. "The Friedman rule: Old and new," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 581-589, March.
    14. Waldo, Douglas G, 1985. "Open Market Operations in an Overlapping Generations Model," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1242-1257, December.
    15. 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.
    16. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Homburg Stefan, 2017. "Understanding Benign Liquidity Traps: The Case of Japan," German Economic Review, De Gruyter, vol. 18(3), pages 267-282, August.
    2. Homburg, Stefan, 2017. "A Study in Monetary Macroeconomics," OUP Catalogue, Oxford University Press, number 9780198807537, Decembrie.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stefan Homburg, 2015. "Superneutrality of Money under Open Market Operations," CESifo Working Paper Series 5219, CESifo.
    2. Homburg, Stefan, 2017. "A Study in Monetary Macroeconomics," OUP Catalogue, Oxford University Press, number 9780198807537, Decembrie.
    3. Firouz Gahvari, 2012. "The Friedman Rule in a Model with Endogenous Growth and Cash‐in‐Advance Constraint," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(5), pages 787-823, August.
    4. Firouz Gahvari & Luca Micheletto, 2019. "Heterogeneity, monetary policy, Mirrleesian taxes, and the Friedman rule," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 67(4), pages 983-1018, June.
    5. Firouz Gahvari & Luca Micheletto, 2012. "Monetary Policy and Redistribution: What can or cannot be Neutralized with Mirrleesian Taxes," CESifo Working Paper Series 3711, CESifo.
    6. Ho Wai-Ming, 2020. "Liquidity constraints, international trade, and optimal monetary policy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(2), pages 1-29, June.
    7. Crettez, Bertrand & Michel, Philippe & Wigniolle, Bertrand, 2002. "Seigniorage and public good in an OLG model with cash-in-advance constraints," Research in Economics, Elsevier, vol. 56(4), pages 333-364, December.
    8. Peter N. Ireland, 2005. "The Liquidity Trap, The Real Balance Effect, 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(4), pages 1271-1301, November.
    9. Pietro Reichlin, 2018. "Money Creation: Tax or Public Liquidity?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(5), pages 1073-1094, August.
    10. Hagiwara, Reona, 2020. "Seigniorage and Japanese fiscal sustainability: Simulation analysis using an overlapping generations model," Economic Modelling, Elsevier, vol. 84(C), pages 340-356.
    11. Gahvari, Firouz & Micheletto, Luca, 2014. "The Friedman rule in an overlapping-generations model with nonlinear taxation and income misreporting," Journal of Public Economics, Elsevier, vol. 119(C), pages 10-23.
    12. Gahvari, Firouz, 2007. "The Friedman rule: Old and new," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 581-589, March.
    13. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    14. Pedro Gomis‐Porqueras & Christopher Waller, 2022. "Optimal Taxes under Private Information: The Role of Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(7), pages 1941-1969, October.
    15. 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.
    16. Lukas Altermatt & Christian Wipf, 2020. "Liquidity, the Mundell-Tobin Effect, and the Friedman Rule," Diskussionsschriften dp2013, Universitaet Bern, Departement Volkswirtschaft.
    17. Sterk, Vincent & Tenreyro, Silvana, 2018. "The transmission of monetary policy through redistributions and durable purchases," Journal of Monetary Economics, Elsevier, vol. 99(C), pages 124-137.
    18. Wang, Gaowang & Zou, Heng-fu, 2011. "Inflation aversion and macroeconomic policy in a perfect foresight monetary model," Economic Modelling, Elsevier, vol. 28(4), pages 1802-1807, July.
    19. Takeo Hori & Koichi Futagami & Shoko Morimoto, 2021. "Time-inconsistent discounting and the Friedman rule: roles of non-unitary discounting," Oxford Economic Papers, Oxford University Press, vol. 73(3), pages 1200-1217.
    20. Arbex, Marcelo & Turdaliev, Nurlan, 2011. "Optimal monetary and audit policy with imperfect taxation," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 327-340, June.

    More about this item

    Keywords

    superneutrality; open market operations; seigniorage; monetary policy; overlapping generations;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lus:reveco:v:66:y:2015:i:3:p:289-302. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.