Arbeitspapier

An overlapping generations model for monetary policy analysis

We integrate an overlapping generations model into a new monetarist framework and show that the Friedman rule is not optimal. This is because inflation makes saving for retirement less attractive, such that young agents optimally choose to increase their consumption at the expense of lower savings. On the other hand, old agents consume less due to the inflation tax. We show that for low inflation rates, the former effect dominates the latter, such that the Friedman rule is not optimal. However, this effect disappears for higher inflation rates such that the optimal rate is at an intermediate level.

Language
Englisch

Bibliographic citation
Series: Working Paper ; No. 272

Classification
Wirtschaft
Micro-Based Behavioral Economics: General‡
Price Level; Inflation; Deflation
Demand for Money
Monetary Policy, Central Banking, and the Supply of Money and Credit: General
Subject
Overlapping generations
monetary theory
Friedman rule

Event
Geistige Schöpfung
(who)
Huber, Samuel
Kim, Jaehong
Event
Veröffentlichung
(who)
University of Zurich, Department of Economics
(where)
Zurich
(when)
2017

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Huber, Samuel
  • Kim, Jaehong
  • University of Zurich, Department of Economics

Time of origin

  • 2017

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