This paper studies the possibility of using financial regulation that prohibits the use of money substitutes as a tool for mitigating the adverse effects of deviations from the Friedman rule. When inflation is not too high regulation aimed at eliminating money substitutes improves welfare by...

This paper studies the possibility of using financial regulation that prohibits the use of money substitutes as a tool for mitigating the adverse effects of deviations from the Friedman rule. When inflation is not too high regulation aimed at eliminating money substitutes improves welfare by...

A model of firm-level optimal pricing under stochastic inflation and fixed costs of adjusting prices is solved and characterized. In this model, inflation alternates stochastically between some positive rate g and zero inflation. We find that a single (s,S) band is not optimal for the firm, as...