A long standing issue in macroeconomics is that of the relation of imperfect competition to fluctuations in output. In this paper we examine the relation between monopolistic competition and the role of aggregate demand in the determination of output. We first show that monopolistically...

The performance of empirical money demand equations over the past decade raises serious questions about money demand predictability. A variety of specifications were presented to explain past episodes of apparent money demand instability, but their success in predicting future money demand is...

This paper examines the conventional monetary equation of exchange rate determination. Under certain exogeneity conditions, one can write the price level, at home and abroad, as the ratio of the nominal money supply to the demand for real money balances. Then, since the exchange rate is the...

Oil prices, commodity prices and American monetary policy, the last operating through a variety of channels, have all figures prominently in explanations of the international inflation process in the last 1960s and early '70s. Our major purpose in this paper is to test these various hypotheses....

We develop a model in which, as in practice, bank debt is both a financial security used to raise funds and a kind of money used to facilitate trade. This dual role of bank debt provides a new rationale for why banks do what they do. In the model, banks endogenously perform the essential...

This paper reviews the extensive theoretical and empirical literature on currency substitution. After discussing the ambiguity surrounding the definition of currency substitution, the paper illustrates the causes of substitutability of different currencies using a cash-in-advance model and a...

We present a monetary model in the presence of segmented asset markets that implies a persistent fall in interest rates after a once and for all increase in liquidity. The gradual propagation mechanism produced by our model is novel in the literature. We provide an analytical characterization of...

We study the problem of a monetary authority pursuing an exchange rate policy that is inconsistent with interest rate parity because of a binding zero lower bound constraint. The resulting violation in interest rate parity generates an inflow of capital that the monetary authority needs to...