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

  • 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)

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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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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