We consider price level determination from the perspective of portfolio choice. Arbitrages among money balances, bonds, and investment goods determine their relative demands. Returns to real balance holdings (transactions services), the nominal interest rate, and after-tax returns to investment...

Economists generally believe that countercyclical fiscal policies have stabilizing effects that work through automatic stabilizers and discretionary actions. Analyses underlying this conventional wisdom focus on intratemporal margins: how employment and personal income respond in the short run...

U.S. velocity of base money exhibits three distinct trends since 1950. After rising steadily for thirty years, it flattens out in the 1980s and falls substantially in the 1990s. This paper explores whether the observed secular movements in velocity can be accounted for exclusively by endogenous...

A short-run negative relationship between monetary aggregates and interest rates--the "liquidity effect"--is central to popular, political, and academic discussions of monetary policy. This paper searches for this empirical relationship. We use monthly U.S. data since 1954 to ask if the...