Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/60673
Authors: 
Bhattacharya, Joydeep
Haslag, Joseph
Martin, Antoine
Singh, Rajesh
Year of Publication: 
2005
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 208
Abstract: 
We explore the connection between optimal monetary policy and heterogeneity among agents. We utilize a standard monetary economy with two types of agents that differ in the marginal utility they derive from real money balances
Subjects: 
a framework that produces a nondegenerate stationary distribution of money holdings. Without type-specific fiscal policy, we show that the zero-nominal-interest-rate policy (the Friedman rule) does not maximize type-specific welfare
further, it may not maximize aggregate ex ante social welfare. Indeed one or, more surprisingly, both types of agents may benefit if the central bank deviates from the Friedman rule
JEL: 
E31
E51
E58
Document Type: 
Working Paper

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