On the Friedman Rule with Heterogeneous Agents

Aleksander Berentsen () and Carlo Strub ()

No 609, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: We consider a general equilibrium model where monetary policy has redistributive effects. Agents have stochastic preferences and face random buying and selling opportunities. We show that the Friedman rule is just the second best policy. However, the Friedman rule is Pareto optimal. It requires to set the gross growth rate of the money supply equal to the discount factor of the most patient agents. Second, we look at the real effects of a money supply shock. In contrast to standard infinitely-lived-representative-agent models, under the Friedman rule a positive shock increases aggregate production and consumption. Interestingly, the shock has no real consequences if monetary policy deviates from the Friedman rule

Keywords: Friedman rule; heterogeneity; monetary policy (search for similar items in EconPapers)
JEL-codes: E00 E50 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mon
Date: 2004-08-11
View list of references

Downloads: (external link)
http://www.carlo-strub.ch/oec/papers/BerentsenStrub2004.pdf main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ecm:feam04:609

Access Statistics for this paper

More papers in Econometric Society 2004 Far Eastern Meetings from Econometric Society
Contact information at EDIRC.
Series data maintained by Christopher F. Baum ().