The welfare state is not merely a stand-in for missing markets; it can do a whole lot more. When generations overlap and the young must borrow to make educational investments, a dynamically-efficient welfare state, by taxing the middle-aged and offering a compensatory old-age pension, can...

In this paper, we argue that the observed difference in the cost of intraday and overnight liquidity is part of an optimal payments system design. In our environment, the interest charged on overnight liquidity affects output, while the cost of intraday liquidity only affects the distribution of...

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

We explore the connection between optimal monetary policy and heterogeneity among agents. We utilize a standard monetary economy with two types of agents that differ in the marginal utility they derive from real money balances — a framework that produces a nondegenerate stationary distribution...

We describe a “business as usual” (BAU) economy in which pollution is a by-product of productive activity by the current generation but “damages” production for future generations. Over time, conditions in the BAU economy become dire: it gets increasingly polluted, consumption falls and...

Rejuveniles are "grown-ups who cultivate juvenile tastes in products and entertain-ment". In this note, we study a standard AK growth model of overlapping gener-ations populated by rejuveniles. For our purposes, rejuveniles are old agents whoderive utility from "keeping up" their consumption...

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...

This paper introduces endogenous longevity risk in an otherwisestandard overlapping generations model with capital. In the model, an agent mayincrease the length of her old age by incurring investments in her own health fundedfrom her wage income. Such private health investments are more...

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...