Electronic Resource
Berkeley, Calif.
:
Berkeley Electronic Press (now: De Gruyter)
The @B.E. journal of macroeconomics
7.2007, 1, art6
ISSN:
1555-0486
Source:
Berkeley Electronic Press Academic Journals
Topics:
Economics
Notes:
This paper examines the role of monetary policy in the presence of endogenous time preference. The framework in which this issue is addressed is a monetary model with cash-in-advance constraints and an additional trading friction that is typical of the class of "liquidity models" of the monetary business cycle. We find that the nature of the optimal policy designed to remove these distortions gets modified in the presence of endogenous utility discounting. Consequently the role of monetary policy is significantly altered. Specifically, monetary policy is likely to be less activist relative to the model with a fixed rate of time preference.
Type of Medium:
Electronic Resource
URL:
http://www.bepress.com/bejm/vol7/iss1/art6
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