In this paper we reconsider the link between tight money policies and inflation in the spirit of Sargent and Wallace's (1981) influential paper, "Some unpleasant monetarist arithmetic." A standard neoclassical model with capital, bonds, and return-dominated currency is used. The potential for...

This paper studies firmsf job creation decisions in a labor market with search frictions. A simple labor market search model is developed in which a firm can search for a second employee while producing with a first worker. A firm expands employment even if the instantaneous payoff to a large...

This paper studies a labor market search-matching model with multi-worker firms to investigate how firms utilize the extensive and intensive margins over the business cycle. The earnings function derived from the Stole-Zwiebel bargaining acts as an adjustment cost function for employment and...

This paper develops a dynamic model of the labor market in which the degree of substitution between employment and hours of work is determined as part of a search equilibrium. Each firm chooses its demand for working hours and number of vacancies, and the earnings profile is determined by Nash...

We explore the long-run implications of adopting a Taylor-type interest-rate rule in a simple monetary growth model in which budget deficits are financed partly by unbacked government debt. Because monetary policy is accommodative only when it is passive, the Taylor principle, which requires...

This paper studies low-interest-rate policies from a public finance perspective. Two policy regimes are considered. In the first regime, the central bank is subordinate and its budget is integrated into the fiscal authority's budget constraint. In this case, monetary policy influences the...

The prevailing models of liquidity traps suggest that a deflationary trap is a stable steady state in a multiple equilibria model. These models implicitly assume that the central bank accelerates the process of disinflation by following a Taylor rule even though there is a long run positive...