Optimal Monetary Policy in a Pure Currency Economy with Heterogenous Agents
30 Pages Posted: 17 Dec 2016 Last revised: 3 Feb 2017
Date Written: December 16, 2016
This paper shows that, in a pure currency economy with heterogeneous agents and multiple commodities, a pecuniary externality plays a key role in making the equilibrium allocation constrained inefficient. Monetary policy intervention can help improve matters.
Keywords: Money, Heterogeneity, Pecuniary Externality, Monetary Policy
JEL Classification: E40
Suggested Citation: Suggested Citation