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...

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...

This paper represents a first attempt at a tractable analysis of how monetary policy influences the income distribution in an economy. It presents a monetary growth model in which inflation affects credit market efficiency, and via this link, influences capital accumulation, and the income...

Researchers have incorporated labor or credit market frictions in isolation within simple neoclassical models to open up a role for institutions, inject realism into their models and examine the impact of these distortions on output and employment. We present an overlapping generations model...

This paper takes a discrete-time adaptation of the continuous−time matching economy described in Pissarides (1990, 2000), and computes the solution to the dynamic planning problem. The solution is shown to be completely characterized by a first−order, non−linear map. We show that the map...

Central banks typically find it difficult to turn off the "political pressure valve". This has important consequences for the types of monetary policies they implement. This paper presents an analysis of how political factors may come into play in the equilibrium determination of inflation. We...

"In this paper, we consider a government that executes a permanent open market sale. The government is forced to eventually use money creation to pay for the debt's expenses, choosing between changing either the money growth rate (the inflation-tax rate) or the reserve requirement ratio (the...

There is a large body of evidence supporting the notion that a) those who grow up to be patient(forward-looking) do better in life compared to those who do not, and b) parents can inculcatethe virtue of delayed gratification in their children by taking the right sort of actions. We studya...

This paper revisits the role played by myopia in generating a theoreticalrationale for pay-as-you-go social security in dynamically efficient economies.Contrary to received wisdom, if the real interest rate is exogenously fixed, enough myopiamay justify public pensions but never alongside...