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.
Amendola, N., Ferraris, L., Mattesini, F. (2016). Optimal Monetary Policy in a Pure Currency Economy with Heterogenous Agents [Working paper].
Optimal Monetary Policy in a Pure Currency Economy with Heterogenous Agents
Ferraris, L;
2016
Abstract
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.
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