Cross-country evidence on inflation and income inequality suggests that they are positively correlated. I explore the hypothesis that this correlation is the outcome of a distributional conflict underlying the determination of fiscal policy.

We describe a class of monetary economies that generate persistent episodes of high and low inflation. In this class of economies, variations in expectations can lead private agents to take actions which then make it optimal for the monetary authority to validate those expectations. We think...

The determinants of money velocity are explored under various assumptions on interest rate uncertainty in a monetary general equilibrium model. It is found that the appearance of velocity function instability can be produced by overlooking interest rate stochastic volatility. In addition, when...

This paper studies the structure and time consistency of optimal monetary policy from a public finance perspective in an economy where agents differ in preference for liquidity and holdings of nominal assets. I find that the presence of distributional effects breaks the link between time...

Three issues regarding asset prices and monetary policy are clarified. First, increases in asset prices due to monetary expansion, despite their “paper” wealth nature, tend to make current consumers as a whole wealthier. Second, the weaker (stronger) effect of monetary policy on investment...

Recent empirical research found that the strong short-term relationship between monetary aggregates and US real output and inflation, as outlined in the classical study by M. Friedman and Schwartz, mostly disappeared since the early 1980s. In the light of the B. Friedman and Kuttner (1992)...

This paper looks at the history of money and its modern form from a scientific and mathematical point of view. The approach here is to emphasize simplicity. A straightforward model and algebraic formula for a large economy analogous to the ideal gas law of thermodynamics is proposed. It may be...

We test for the presence of interest rate smoothing in forward looking Taylor rules in first differences. We also consider financial and asymmetric preferences indicators. We find that interest rate smoothing is not induced by an omitted variable bias.

One of the more intractable problems in the area of monetary economics is the measurement of cash payments. Whereas the stock of currency in circulation [C] is well defined and readily measured, the transactions velocity of currency [Vc] (the average number of times currency turns over in any...

Recent empirical results about the US term structure are difficult to reconcile with the classical hypothesis of rational expectations even if time-varying but stationary term premia are allowed for. A hypothesis of rational learning about the conditional variance of the log pricing kernel is...