Friedman rule

This is not to be confused with Friedman's k-percent rule which advocates a constant yearly expansion of the monetary base.

[6] While deviations from the Friedman rule are typically small, if there is a significant foreign demand for a nation's currency, such as in the United States, the optimal rate of inflation is found to deviate significantly from what is called for by Friedman rule in order to extract seigniorage revenue from foreign residents.

[6] In the case of the United States, where over half of all U.S. dollars are held overseas, the optimal rate of inflation is found to be anywhere from 2 to 10%, whereas the Friedman rule would call for deflation of almost 4%.

[6] Recent results have also suggested that in order to achieve the goal of the Friedman rule, namely to reduce the opportunity cost and monetary frictions associated with money, it may not be required that the nominal interest rate be set at zero.

[8] Contrary to theoretical predictions, the Friedman rule was not found to be welfare-improving, performing no better than a constant money supply regime.