This paper attempts to provide a perspective on the causes of inflation by exploring why sustained inflations occur and the role of monetary policy in the inflation process. The conclusion reached in this paper is that in the last ten years there has been a convergence of views in the economics...

The proposition that real rates are equal across countries is worth studying because it is central to our understanding of open economy macroeconomics and because it is also an important issue to policy makers. If it is true, then domestic monetary authorities have no control over their real...

How real interest rates behave over time is critical to our understanding of many macroeconomic issues, and much recent research has pursued this question. Very little of the research, however, has focused on real interest rates outside the United States. This paper is an empirical exploration...

A heated debate has arisen over what Modigliani has dubbed the Macro Rational Expections (MRE) hypothesis. This hypothesis embodies two component hypotheses: 1) rational expectations and 2) short-run neutrality -- i.e., that anticipated changes in aggregate demand will have already been taken...

The impact of a money stock increase on nominal short-term interest rates has been a hotly debated issue in the monetary economics literature. The most commonly held view -- also a feature of most structural macro models--has an increase in the money stock leading, at least in the short-run, to...

This paper is an empirical exploration of real interest rate movements in the United States over the last fifty years. It focuses on several questions which have repeatedly arisen in the literature. How valid is the hypothesis associated with Fama (1975) that the real rate of interest is...

This paper is an application of efficient markets theory to analyze empirically the relationship of money supply growth and long-term interest rates. This approach has the advantage over earlier research on this subject in that it imposes a theoretical structure on this relationship that allows...

This paper conducts tests of the rationality of both inflation and short-term interest rate forecasts in the bond market. These tests are developed with the theory of efficient markets and make use of security price data to infer information on market expectations

Recent theorizing with business cycle models which incorporate features of the Friedman-Phelps natural rate model along with rational expectations lead to the following policy conclusions. Anticipated changes in aggregate demand policy will have already been taken into account in economic agents...