In this note, we develop a search-based monetary growth model to analyze the growth and welfare effects of inflation. We introduce endogenous growth via capital externality into a two-sector search model and compare the effects of inflation to those from a standard cash-in-advance (CIA) growth...

Monetary policy has become difficult to characterize or follow since 2007. A debate as to whether interest rate targets or monetary aggregate targets are better indicators of policy and prospective outcomes has given way to a new credit policy built on inflating the Federal Reserve (Fed) balance...

In late 2008 and early 2009, there has been a serious deterioration in the economic outlook of political leaders, the media and many economic analysts. Comparisons of recent performance and the outlook have degenerated into comparisons with the Great Depression of the 1930s, suggesting that the...

Milton Friedman, one of greatest economists of all time, died on November 16, 2006 at age 94. He was famous for his conclusion that “inflation is always and everywhere a monetary phenomenon,” and for the related notion that ultimately the only thing a central bank, such as the Federal...

Proponents of inflation targeting suggest that countries using this tool understand better, their responsibility for price stability and are able to better communicate their superior policy target. Thus, they also should achieve lower inflation. Fed Chair Ben Bernanke is a strong proponent of...

The U.S. entered a recession in December 2007. Coming in train with a foreclosure crisis that began in late 2006 and its associated financial crisis that began in August 2007, there is a tendency for analysts to attribute the recession to the financial crisis. The worst aspects of the financial...

The continuing foreclosure crisis worsened in October 2008. The Federal Reserve (Fed) continued the aggressive expansion of new private credit that it began in mid-September and it created three new credit facilities to add to the plethora of other facilities created since the financial crisis...

How do intellectual property rights that determine the market power of firms influence the effects of monetary policy on economic growth and social welfare? To analyze this question, we develop a monetary R&D-based growth model with elastic labor supply. We find that monetary expansion reduces...

An analysis of the impact from stabilizing instruments important to macroeconomic policy on output in the US is presented. A simple approach to identify the influence of macroeconomic-policy instruments, based on the St. Louis equation, is clearly presented and examined using annual US data from...

This study analyzes the growth and welfare effects of monetary policy in a two-country Schumpeterian growth model with cash-in-advance constraints on consumption and R&D investment. We find that an increase in the domestic nominal interest rate decreases domestic R&D investment and the growth...