Optimal portfolios differ according to the length of time they are held without being rebalanced. For the case in which asset returns are identically and independently distributed, it has been shown that optimal portfolios become less diversified as the holding period lengthens.We show that the...

This paper develops a simple theory of the supply of index bonds by a firm, and uses that model to examine in some detail possible reasons for the non-existence of privately issued index bonds in the United States. The major elements of the theory involve the trade-off between the tax advantages...

Models of inflation and growth in the sixties emphasized the portfolio substitution mechanism by which higher inflation made capital more attractive to hold relative to money, leading to higher capital intensity, and in the transition period to higher growth.The empirical evidence, however, is...

Monetary policies in the U.S., Japan, Germany and the United Kingdom over the period 1973-1986 are compared and evaluated, with the aim of drawing lessons for monetary policy from the recent historical record. All four countries shifted during this period to money targeting, though with...

Government issue of bonds indexed to the price level has long been recommended by economists, to no observed effect. Recently skepticism has been expressed about the real effects of such government action, or indeed of any government financial intermediation. This paper examines two main...

In this paper I reflect on my first year as Governor of the Bank of Israel, which I joined in May 2005. I start by describing the current state of the Israeli economy and monetary policy and economic developments during the past year. I then review a series of issues that have arisen during the...

Since August 1982 the international debt crisis has dominated economic policymaking in the developing countries, economic relations between the debtor and creditor countries, the attention of the multilateral institutions in their dealings with the debtor nations, and private sector decisions on...

The treatment of the stock market in finance and macroeconomics exemplifies many of the important differences in perspective between the two fields. In finance, the stock market is the single most important market with respect to corporate investment decisions. In contrast, macroeconomic...

If asset returns have different dynamics, then their short and long run risk characteristics differ. For instance, if returns on one asset follow a random walk, it is very risky to hold for the long term even if it is quite safe for the short term. This paper examines the effects of different...

The main focus of this paper is on the process and progress of economic reform in Russia. But I start with four historical questions that bear on the current situation. How advanced was Russia in 1913? What relevance, if any, does the New Economic Policy of the 19205, or NEP, have for the...