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dc.contributor.authorBhattacharya, Joydeepeng
dc.contributor.authorHaslag, Joseph H.eng
dc.contributor.authorMartin, Antoineeng
dc.contributor.authorSingh, Rajesheng
dc.description.abstractIn this paper, we explore the connection between optimal monetary policy and heterogeneity among agents. We study a standard monetary economy with two types of agents in which the stationary distribution of money holdings is non-degenerate. Sans type-specific fiscal policy, we show that the zero-nominal-interest rate policy (the Friedman rule) does not maximize type-specific welfare; it may not maximize aggregate social welfare either. Indeed, one or, more surprisingly, both types may benefit if the central bank deviates from the Friedman rule. Our results suggest a positive explanation for why central banks around the world do not implement the Friedman rule.eng
dc.identifier.citationDepartment of Economics, 2004eng
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 04-21eng
dc.subjectFriedman ruleeng
dc.subjectmonetary policyeng
dc.subject.lcshMonetary policyeng
dc.subject.lcshMonetary models -- Econometric modelseng
dc.titleWho is Afraid of the Friedman Rule?eng
dc.typeWorking Papereng

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