This paper analyzes the relationship between money and labor supply, and derives money's optimal rate of return when production functions experience stochastic shocks. Increases in money's return increase both the deterministic component and variance of labor supply. Moreover, money's optimal...

In a parsimonious regime switching model, expected consumption growth varies over time. Adding in ation as a conditioning variable, we uncover two states in which expected consumption growth is low, one with high and one with negative expected in ation. Embedded in a general equilibrium asset...