This paper studies a overlapping generations economy with capital where limitedcommunication and stochastic relocation create an endogenous transactions role for…at money. We assume a production function with a knowledge-externality (Romer-style) that nests economies with endogenous growth (AK...

Faced with real and nominal shocks, what should a benevolent central bankdo, …x the money growth rate or target the inflation rate? In this paper, wemake a …rst attempt at studying the optimal choice of monetary policy in-struments in a micro-founded model of money. Speci…cally, we produce...

The Friedman rule, a widely studied prescription for monetary policy, is optimal inTownsend’s turnpike model of money; it is not so in the overlapping generations versionof his stochastic relocation model of money. We investigate these monetary models inthe light of this disparity. To that...

In this paper, we explore the connection between optimal monetary policy and heterogeneityamong agents. We study a standard monetary economy with two types of agents inwhich the stationary distribution of money holdings is non-degenerate. Sans type-specific fiscalpolicy, we show that the...

Inflation rates in a number of OECD follow a common trend over the past four decades: inflation starts out low in the 1960s, rises for a time before peaking in the 1970s or early 1980s, and then falls back to initial levels. This similarity in the behavior of trend inflation suggests that any...

In models of money with an infinitely-lived representative agent (ILRA models), the optimal monetary policyis almost always the Friedman rule. Overlapping generations (OG) models are different: in this paper, westudy how they are different, and why. We investigate the welfare properties of...

We study several popular monetary models which generate a non-degenerate stationary distribution of money holdings. Across these environments, our principal finding is as follows: a monetary policy that sets long run nominal interest rates to zero (the Friedman rule) does not typically maximize...

In einer im Mai 2010 von der WirtschaftsfördergesellschaftVorpommern mbH (WFG) in Zusammenarbeit mit kreislichen undstädtischen Wirtschaftsförderern sowie der Fachhochschule Stralsund, FachbereichWirtschaft, durchgeführten branchenübergreifenden Unternehmensbefragungzur Zufriedenheit mit...

The paper evaluates the performance of three popular monetary policy rules when the central bank is learning aboutthe parameter values of a simple New Keynesian model. The three policies are: (1) the optimal non-inertial rule; (2)the optimal history-dependent rule; (3) the optimal price-level...

This paper studies an advantage of commitment over discretion when a central bankobserves only noisy measures of current inflation and output, in the context of an optimizingmodel with nominal-price stickiness. Under a commitment regime, if current policy turns outto be too expansionary...