This note considers Tobin's average Q in a framework where firms finance investment by equities and debt. The determination of its long-run equilibrium value Qo is based on positing equality of the loan rate and, adjusted for a risk premium, the return on equities. Qo can thus be characterized...

During the last 25 years, the stock market in the US has been strongly pro-cyclical in the presence of a counter-cyclical monetary policy. In this paper, we use an endogenous business cycle model to explore the factors contributing to a pro-cyclical stock market. A dynamic expectation structure...

This note considers Tobin's average Q in a framework where firms finance investment by equities and debt. The determination of its long-run equilibrium value Q° is based on positing equality of the loan rate and, adjusted for a risk premium, the return on equities. Q° can thus be characterized...

During the last 25 years, the stock market in the US has been strongly pro-cyclical in the presence of a counter-cyclical monetary policy. In this paper, we use an endogenous business cycle model to explore the factors contributing to a pro-cyclical stock market. A dynamic expectation structure...

This note considers Tobin's average Q in a framework where firms finance investment by equities and debt. The determination of its long-run equilibrium value Q° is based on positing equality of the loan rate and, adjusted for a risk premium, the return on equities. Q° can thus be characterized...

The Gibson paradox,long observed by economists and named by John Maynard Keynes (1936),is a positive relationship between the interest rate and the price level. This paper explains the relationship by means of interest-rate, cost-push inflation.In the mode,spending is driven in part by changes...

Existing menu cost models, when parameterized to match the micro-price data, cannot reproduce the extent to which the fraction of price changes increases with inflation. In addition, in the presence of strategic complementarities, they predict implausibly large menu costs and misallocation. We...

Drumetz and Pfister (2021) make several claims about the inadequacy and fallacies of Modern Money Theory (MMT) and conclude that MMT is nothing more than a political manifesto; there are no theoretical and empirical foundations behind it. This paper addresses this last point by focusing on the...

This working paper contrasts the neo-Keynesian and post-Keynesian theories of monetary policy for an open economy, highlighting the irrelevance of the orthodox theory and the explanatory capacity of heterodoxy for an emerging economy such as Mexico. It focuses on the role of the central bank and...