Optimality of the Friedman rule in an overlapping generations model with spatial separation
By: Joseph H. Haslag, Antoine Martin.
Contributors: Martin, Antoine.; Federal Reserve Bank of New York.
Series: Staff reports ;; no. 225; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 225.
Publisher: Federal Reserve Bank of New York
Published: 2005
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Monetary policy -- Mathematical models.; Monetary supply -- Mathematical models.; Intergenerational relations -- Economic aspects -- Mathematical models.
Description: "We examine models with spatial separation and limited communication that have shown some promise toward resolving the disparity between theory and practice concerning optimal monetary policy; these models suggest that the Friedman rule may not be optimal.  We show that intergenerational transfers play a key role in this result, the Friedman rule is a necessary condition for an efficient allocation in equilibrium, and the Friedman rule is chosen whenever agents can implement mutually beneficial arrangements.  We conclude that in order for these models to resolve the aforementioned disparity, they must answer the following question: Where do the frictions that prevent agents from implementing mutually beneficial arrangements come from?"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 10/27/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.