Kim, Jinill; Ruge-Murcia, Francisco J. - In: Journal of Economic Dynamics and Control 35 (2011) 12, pp. 2064-2077
Monetary policy in an economy with both downwardly rigid wages and a transaction motive for money demand is studied using a dynamic stochastic general equilibrium model. The two key features of the model imply that both Tobin's “inflation grease” argument and Friedman's rule are operative,...