In 1944 Franco Modigliani published a famous article summarizing the Keynesian model; in 1963 he extended the 1944 framework. This paper,written for a conference in honor of Modigliani, asks how the earlier papers would be modified in the light of recent developments in macroeconomics. The...

The paper sets out a simple monetary model anduses it to compare alternative monetary systems. Money may be either fiat or gold. Both gold supply and velocity are uncertain. Asset demands are derived from expected utility maximization. I demonstrate the basic argument against a commodity money...

The recent appreciation of the dollar is widely believed to have reduced the output costs of the disinflation. But there remains the question of whether those early gains have to be repaid when the exchange rate depreciates.The first question taken up is the effect of real exchange rate...

Estimates of the cost of disinflation made before the recent reduction in the inflation rate varied widely. Estimates were made in terms of the sacrifice ratio -- the percentage points of GNP at an annual rate lost per percentage point reduction in the inflation rate. At one extreme it was...

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...

The paper opens with a description of the salient features of the Israeli economy. These consist of a large government sector(the government budget has absorbed more than 80% of GNP in some recent years); high levels of defense spending; a large government budget deficit; a large current account...

The main issue discussed in the supply shock literature that followed the oil and food price shocks of the seventies was whether to accommodate. The supply shock reduces the equilibrium level of output, and monetary policy can not affect that. But in the seventies supply shocks were also...

The paper sets out and analyzes a simple model of money, banking, and price level determination. The model is first used to illustrate recent developments in the theory and analysis of banking, particularly the distinction between the portfolio management services provided by banks and their...

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...

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...