Cash-in-advance constraints in the Diamond overlapping generations model: neutrality and optimality of monetary policies

This paper is a study of money in overlapping generations models with cash- in-advances constraints. We first offer a brief review of different feature s of the cash-in-advance constraint. Then we propose a general formulation and study the neutrality of money. We show that both neutrality and equilib rium dynamics defend on the form of the cash-in-advance constraint. We then show that optimal intergenerational resources sharing can be implemented t hrough monetary transfers. Finally, we find that the Chicago Rule is implie d by the optimal monetary policy.