Who is afraid of the Friedman rule?

Joydeep Bhattacharya, Joseph Haslag, Antoine Martin and Rajesh Singh ()

No 208, Staff Reports from Federal Reserve Bank of New York

Abstract: We explore the connection between optimal monetary policy and heterogeneity among agents. We utilize a standard monetary economy with two types of agents that differ in the marginal utility they derive from real money balances-a framework that produces a nondegenerate stationary distribution of money holdings. Without type-specific fiscal policy, we show that the zero-nominal-interest-rate policy (the Friedman rule) does not maximize type-specific welfare; further, it may not maximize aggregate ex ante social welfare. Indeed one or, more surprisingly, both types of agents may benefit if the central bank deviates from the Friedman rule.

Keywords: Friedman, Milton; Interest rates; Banks and banking, Central; Monetary policy (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr208.pdf (application/pdf)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr208.html (text/html)

Related works:
Journal Article: WHO IS AFRAID OF THE FRIEDMAN RULE? (2008)
Working Paper: Who is Afraid of the Friedman Rule (2008)
Working Paper: Who is Afraid of the Friedman Rule? (2004)
Working Paper: Who is Afraid of the Friedman Rule? (2004)
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:fednsr:208

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().