At the New York Fed, our mission is to make the U.S. economy stronger and the financial system more stable for all segments of society. We do this by executing monetary policy, providing financial services, supervising banks and conducting research and providing expertise on issues that impact the nation and communities we serve.
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The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The New York Fed provides a wide range of payment services for financial institutions and the U.S. government.
The New York Fed offers the Central Banking Seminar and several specialized courses for central bankers and financial supervisors.
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The Economic Inequality & Equitable Growth hub is a collection of research, analysis and convenings to help better understand economic inequality.
The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
May 2005 Number 208 |
JEL classification: E31, E51, E58 |
Authors: Joydeep Bhattacharya, Joseph Haslag, Antoine Martin, and Rajesh Singh We explore the connection between optimal monetary policy and heterogeneity among agents. We utilize a standard monetary economy with two types of agents that differ in the marginal utility they derive from real money balances—a framework that produces a nondegenerate stationary distribution of money holdings. Without type-specific fiscal policy, we show that the zero-nominal-interest-rate policy (the Friedman rule) does not maximize type-specific welfare; further, it may not maximize aggregate exante social welfare. Indeed one or, more surprisingly, both types of agents may benefit if the central bank deviates from the Friedman rule. |
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