The optimum quantity of money is a normative monetary policy conclusion drawn from the long-run properties of a theoretical model. Most famously associated with Milton Friedman, the optimum calls for a zero nominal rate of interest and thus a steady state of price deflation at the long-run real rate of interest. Although this policy prescription has played a minor role in monetary policy implementation, it has had an enormous influence in monetary theory.
Bargaining Deflation Dynamic new Keynesian models Fiat money Friedman rule Friedman, M. Hold-up problem Inflation Monetary policy Optimal taxation Optimum quantity of money Search-theoretic monetary models Seigniorage Transactions role of money
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The author would like to thank Charles Carlstrom and John Hoag for their helpful comments.
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