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Implementing the Friedman rule

Peter Ireland ()

No 12, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

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 restrict only 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: Monetary; policy (search for similar items in EconPapers)
Date: 2000, Revised 2000
New Economics Papers: this item is included in nep-dge and nep-mon
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Journal Article: Implementing the Friedman Rule (2003) Downloads
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Working Paper: Implementing the Friedman Rule (2000) Downloads
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