BoJ paper attempts to ditch Friedman rule with new model
Paper outlines model where mild inflation is welfare-optimising
A researcher at the Bank of Japan (BoJ) sets out a model allowing economists to avoid relying on a ‘Friedman rule' when performing monetary analysis in a discussion paper published today (April 13) by the BoJ.
Takemasa Oda's paper Optimal inflation rate in a life-cycle economy observes the Friedman rule holds in neoclassical growth models featuring a single, infinitely lived representative agent. The rule, proposed by Milton Friedman, finds welfare is optimised where nominal interest rates are
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