Optimality of the Friedman rule in overlapping generations model with spatial separation

Joseph Haslag and Antoine Martin

No RWP 03-03, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: Recent papers suggest that when intermediation is analyzed seriously, the Friedman rule does not maximize social welfare in overlapping generations model in which money is valued because of spatial separation and limited communication. These papers emphasize a trade-off between productive efficiency and risk sharing. We show financial intermediation or a trade-off between productive efficiency and risk sharing are neither necessary nor sufficient for that result. We give conditions under which the Friedman rule maximizes social welfare and show any feasible allocation such that money grows faster than the Friedman rule is Pareto dominated by a feasible allocation with the Friedman rule. The key to the results is the ability to make intergenerational transfers.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.kansascityfed.org/documents/5393/pdf-RWP03-03.pdf (application/pdf)

Related works:
Journal Article: Optimality of the Friedman Rule in an Overlapping Generations Model with Spatial Separation (2007)
Journal Article: Optimality of the Friedman Rule in an Overlapping Generations Model with Spatial Separation (2007)
Working Paper: Optimality of the Friedman rule in an overlapping generations model with spatial separation (2005)
Working Paper: Optimality of the Friedman Rule in Overlapping Generations Model with Spatial Separation (2003)
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: https://EconPapers.repec.org/RePEc:fip:fedkrw:rwp03-03

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Research Working Paper from Federal Reserve Bank of Kansas City Contact information at EDIRC.
Bibliographic data for series maintained by Zach Kastens ().