I. Correia, J. P. Nicolini and P. Teles, “Optimal Fiscal and Monetary Policy Equivalence Results,” Journal of Political Economy, Vol. 116, No. 1, 2008, pp. 141-170.doi10.1086/533504 - References

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I. Correia, J. P. Nicolini and P. Teles, “Optimal Fiscal and Monetary Policy: Equivalence Results,” Journal of Political Economy, Vol. 116, No. 1, 2008, pp. 141-170. doi:10.1086/533504

has been cited by the following article:

TITLE: Credit, Externalities, and Nonoptimality of the Friedman Rule

AUTHORS: Keiichiro Kobayashi, Masaru Inaba, Kengo Nutahara

KEYWORDS: Externalities; Cash-Credit Model; Monetary Policy; Friedman Rule

JOURNAL NAME: Theoretical Economics Letters, Vol.2 No.2, May 24, 2012

ABSTRACT: We construct a cash-credit model with positive externalities in the production of credit goods. It is shown that under suitable conditions, the Friedman rule is not optimal and there exists an optimal nominal interest rate that maximizes the social welfare and output. This is because increasing the nominal interest rate improves sectoral misallocations caused by externalities in our economy.