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dc.contributor.authorBhattacharya, Joydeepeng
dc.contributor.authorHaslag, Joseph H.eng
dc.contributor.authorMartin, Antoineeng
dc.description.abstractWe propose a new explanation for the observed difference in the cost of intraday and overnight liquidity. We argue that the low cost of intraday liquidity is an application of the Friedman rule in an environment where a deviation of the Friedman rule is optimal with respect to overnight liquidity. In our environment the cost of overnight liquidity affects output while the cost of intraday liquidity only redistributes resources between money holders and non-money holders. We show that it is optimal to set a high overnight rate to reduce the incentives to overuse money. In contrast, intraday liquidity should have a low cost to provide risk-sharing.eng
dc.identifier.citationDepartment of Economics, 2007eng
dc.publisherDepartment of Economicseng
dc.relation.ispartofEconomics publicationseng
dc.relation.ispartofcommunityUniversity of Missouri-Columbia. College of Arts and Sciences. Department of Economicseng
dc.relation.ispartofseriesWorking papers (Department of Economics);WP 07-04eng
dc.subjectFriedman ruleeng
dc.subjectmonetary policyeng
dc.subjectrandom-relocation modelseng
dc.subject.lcshMonetary policy -- Mathematical modelseng
dc.subject.lcshFriedman, Milton -- 1912-2006.eng
dc.titleMoney, output and the payment system: Optimal monetary policy in a model with hidden efforteng
dc.typeWorking Papereng

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