Cash-in-advance constraints in the diamond overlapping generations model: neutrality and optimality of monetary policies
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.
|Date of creation:||01 Jan 1998|
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