Possible indeterminacy of the price level, when the nominal interest rate is arbitrarily set at some level, is of interest in monetary theory. This paper reexamines this issue within a stochastic macromodel, considering both a "pure" interest rate peg and an interest rate peg as the limiting...

A simple economy is modeled to mimic certain basic characteristics of a monetary economy with agents who trade with one another. The analysis focuses on the way bank reserves affect the return and risk associated with bank investments and how this return and risk affects the extent of trading...

Taking account of the costs of tax evasion and avoidance activity, together with the government's costs of tax enforcement, it is shown that the optimal point on a stylized Laffer curve is located on the positively sloped region, not at the maximum point of the curve. The analysis eschews the...