On the monetary model with temptation and self control

2017 Fiscal Year Final Research Report

• Project/Area Number: 15K17016
• Research Category: Grant-in-Aid for Young Scientists (B)
• Allocation Type: Multi-year Fund
• Research Field: Economic theory
• Research Institution: Meiji University (2017); Chiba University (2015-2016)
• Principal Investigator: Hiraguchi Ryoji 明治大学, 政治経済学部, 専任准教授 (90520859)
• Project Period (FY): 2015-04-01 – 2018-03-31
• Keywords: 金融政策 / 誘惑と自制 / フリードマンルール

Outline of Final Research Achievements

In this study, I constructed a search theoretic model of money with temptation an self-control. In each period, agents are tempted to spend all their money by the end of the period, and they suffer from the forgone utility that could have been obtained by adopting the tempting choice. I found that the Friedman rule of setting the monetary policy to zero may not be optimal monetary policy rule. A positive nominal interest rate improves welfare because it reduces the real money balances and renders the temptation less attractive. The deviation from the rule also generates the welfare distortion, but its first order effect is zero around the rule. I performed the numerical analysis and found that the welfare gained by deviating from the rule is equivalent to 0.67% of consumption.

Free Research Field

経済学