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. The authors first offer a brief review of different features of the cash-in-advance constraint. Then they propose a general formulation and study the neutrality of money. The authors show that both neutrality and equilibrium dynamics depend on the form of the cash-in-advance constraint. They then show that optimal intergenerational resources sharing can be implemented through monetary transfers. Finally, the authors find that the Chicago Rule is implied by the optimal monetary. Copyright 1999 by Royal Economic Society.