We study monetary models with nondegenerate stationary distributions of money holdings. We find that the Friedman rule does not typically maximize ex post social welfare. An increase in the rate of growth of the money supply has two effects: the standard distortionary, or rate-of-return, effect...

We study several popular monetary models which generate a nondegenerate 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...