WHO IS AFRAID OF THE FRIEDMAN RULE?

Joydeep Bhattacharya, Joseph Haslag, Antoine Martin and Rajesh Singh

Economic Inquiry, 2008, vol. 46, issue 2, 113-130

Abstract: We explore the connection between optimal monetary policy and heterogeneity among agents in a standard monetary economy with two types of agents where the stationary distribution of money holdings is nondegenerate. Sans type‐specific fiscal policy, we show that the zero‐nominal‐interest rate policy (the Friedman rule) does not maximize type‐specific welfare; it may not maximize aggregate ex ante social welfare either. Indeed, one or, more surprisingly, both types may benefit if the central bank deviates from the Friedman rule. (JEL E31, E51, E58)

Date: 2008
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https://doi.org/10.1111/j.1465-7295.2007.00068.x

Related works:
Working Paper: Who is Afraid of the Friedman Rule (2008)
Working Paper: Who is afraid of the Friedman rule? (2005)
Working Paper: Who is Afraid of the Friedman Rule? (2004)
Working Paper: Who is Afraid of the Friedman Rule? (2004)
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