This paper studies the impact of informality on the long-run relationship between inflation and unemployment in developing economies. I present a dynamic general equilibrium model with informality in both labor and goods markets and where money and credit coexist. An increase in inflation...

We integrate an overlapping generations model into a new monetarist framework and show that the Friedman rule is not optimal. This is because inflation makes saving for retirement less attractive, such that young agents optimally choose to increase their consumption at the expense of lower...

The target problem considers the central bank's use of optimal tools and targets for purposes of stabilization and welfare optimization. In this study, this question is answered anew in a microfounded approach. By adding imperfect information to the model of [Berentsen and Waller, 2011], a...

We develop a dynamic general equilibrium model to analyze the relationship between monetary policy, money demand, and unemployment. Our model succeeds in replicating the empirical fact of a downward sloping Phillips curve for low inflation rates and an upward sloping curve for high inflation...

Some have argued that a significant decrease in the demand for money, due to financial innovations, could imply that central banks are unable to implement effective monetary policies. This paper argues that central banks are always able to influence the economy's interest rates, because their...

This paper attempts to explain one version of an empirical puzzle noted by Mankiw (2003): a Baumol-Tobin inventory-theoretic money demand equation predicts that the average adult American should have held approximately $551.05 in currency and coin in 1995, while data show an average of $100. The...

Recent time-series evidence has re-confirmed the forecasting ability of Swiss broad money. The same money demand studies and others, however, find that the income elasticity is greater than one. Such parameter estimates are difficult to reconcile with transactions demand theory. This study...

This study provides strong empirical support for modeling the demand for monetary assets within a consumer demand framework. We estimate a linearised locally flexible almost ideal demand system, containing five monetary assets, over the period 1991Q4 to 1998Q4. Estimating the system in...

Using non-parametric weak separability tests that are extended to allow for measurement errors in the data, a broad group of UK monetary assets is found to be weakly separable from consumer goods and leisure over the larger part of the nineties. Financial innovations have made assets with...

In the paper, an analogy with length measurement is applied in order to explore the nature of the unit for value measurement, i.e. the unit of account. As the meter is defined as the length traveled by light in vacuum during 1/299 792 458 of a second, the unit of account krona is defined as the...