Optimal money growth in a limited participation model with heterogeneous agents

Date
2005
Authors
Başçi, E.
Saglam I.
Editor(s)
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
Review of Economic Design
Print ISSN
14344742
Electronic ISSN
Publisher
Volume
9
Issue
2
Pages
91 - 108
Language
English
Journal Title
Journal ISSN
Volume Title
Series
Abstract

This paper studies optimal money growth in a cash-in-advance production economy with heterogeneity in patience levels and know-how. We show that the rate of deflation suggested by the Friedman rule is limited by the subjective discount rate of the most patient agent in the economy. The output distortion due to cash-in-advance constraints on firms can completely be eliminated by means of the Friedman rule if and only if firms are run by the most patient agents. © Springer-Verlag 2005.

Course
Other identifiers
Book Title
Citation
Published Version (Please cite this version)