Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
We explore the connection between optimal monetary policy and heterogeneity among agents in a standard monetary economy with two types of agents where the stationary distribution of money holdings is nondegenerate. Sans type‐specific fiscal policy, we show that the zero‐nominal‐interest rate policy (the Friedman rule) does not maximize type‐specific welfare; it may not maximize aggregate ex ante social welfare either. Indeed, one or, more surprisingly, both types may benefit if the central bank deviates from the Friedman rule. (JEL E31, E51, E58)