Time: 9:00am-10:30am May 13,2021
Tencent Webinar: 821 2237 5351
Host: Prof. ZHANG Chengsi
Command: Prof. Ding Shuze
Abstract: We explore the celebrated Friedman rule for optimal monetary policy in the context of a laboratory economy based on the Lagos-Wright model. The rule that Friedman proposed can be shown to be optimal in a wide variety of different monetary models, including the Lagos-Wright model. However, we are not aware of any prior empirical evidence evaluating the welfare consequences of the Friedman rule. We explore two implementations of the Friedman rule in the laboratory. The first is based on a deflationary monetary policy where the money supply contracts to offset time dis-counting. The second implementation pays interest on money removing the private marginal cost from holding money. We explore the welfare consequences of these two theoretically equivalent implementations of the Friedman Rule and compare results with two other policy regimes, a constant money supply regime and another regime advocated by Friedman, where the supply of money grows at a constant k-percent rate. We find that, counter to theory, the Friedman rule is not welfare improving, performing no better than a constant money regime. By one welfare measure, we find that the k percent money growth rate regime performs best.
Speaker Bio: Daniela Puzzello, professor of Economics (tenure) at Indiana University researches on economic theory, monetary economics and experimental economics. She has published many papers in international top academic journals such as American Economic Review, Econometrica, Economic Theory, European Economic Review, Journal of Mathematical Economics, and Journal of Monetary Economics. In recent years, she has focused on the issue of distribution efficiency in a decentralized trading environment.