Article ID Journal Published Year Pages File Type
983442 The Quarterly Review of Economics and Finance 2009 13 Pages PDF
Abstract
This paper studies the Friedman rule for the optimal quantity of money in money in the utility (MIU) and cash-credit models while considering two specifications for the endogenous discount factor. In the first specification, the discount factor depends directly on the utility level. In the second, the discount factor depends on every component of the utility function. We show that under the former specification the Friedman rule is the optimal policy. Under the latter, however, while the Friedman rule is optimal for the MIU model, it is not optimal for the cash-credit model.
Keywords
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
, ,