Creator: Levine, David K. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 388 Abstract:
Previous authors have argued that the optimal monetary policy is contractionary. If buyers value consumption substantially more than sellers, there is some randomness and informational constraints make asset trading useful, we show that there is an incentive compatible expansionary policy that dominates all incentive compatible contractionary policies.
Keyword: Expansion, Contraction, Optimal monetary policy, Asset trading, Trade, and Private information Subject (JEL): D82 - Information, knowledge, and uncertainty - Asymmetric and private information and E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy