Implementing the Friedman Rule

Peter Ireland ()

No 460, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: In cash-in-advance models, necessary and sufficient conditions for the existence of an equilibrium with zero nominal interest rates and Pareto optimal allocations place restrictions only on 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.

Keywords: Friedman Rule; Optimal Monetary Policy (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon
Date: 2000-06-01
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Related works:
Working Paper: Implementing the Friedman rule (2000)
Working Paper: Implementing the Friedman Rule (2002)
Journal Article: Implementing the Friedman Rule (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:boc:bocoec:460

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