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Eisei Ohtaki
''Asymmetric liquidity shocks and optimal monetary policy''
( 2014, Vol. 34 No.2 )
This article develops an OLG model with random relocations of agents among more-than-two islands, wherein asymmetric liquidity shocks are observed. The model exhibits suboptimality of the Friedman rule. Furthermore, it is shown that there is no room for monetary policy to improve social welfare when the number of locations is extremely large. This article then shows that the discount window policy achieves an optimal allocation.
Keywords: Money; Friedman rule; Discount window policy; Spatial separation; Overlapping generations model.
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
Manuscript Received : Aug 22 2013 Manuscript Accepted : May 25 2014

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