This paper studies the joint business cycle dynamics of inflation, money growth, nominal and real interest rates and the velocity of money. I extend and estimate a standard cash and credit monetary model by adding idiosyncratic preference shocks to cash consumption as well as a banking sector....

The tug-o-war for supremacy between inflation targeting and monetary tar-geting is a classic yet timely topic in monetary economics. In this paper, werevisit this question within the context of a pure-exchange overlapping genera-tions model of money where spatial separation and random relocation...

In an overlapping generations model, momentary equilibria are defined as points that lieon the intergenerational offer curve, i.e., they satisfy agents’ optimality conditions and marketclearing at any date. However, some dynamic sequences commencing from such points may notbe considered valid...

In this paper, we study a decentralized monetary economy witha speci…ed set of markets, rules of trade, an equilibrium concept, and a restricted setof policies and derive a set of equilibrium (monetary) allocations generated by thesepolicies. Next we set up a simpler constrained planning...

Faced with real and nominal shocks, what should a benevolent central bankdo, …x the money growth rate or target the inflation rate? In this paper, wemake a …rst attempt at studying the optimal choice of monetary policy in-struments in a micro-founded model of money. Speci…cally, we produce...

In models of money with an infinitely-lived representative agent (ILRA models), the optimal monetary policyis almost always the Friedman rule. Overlapping generations (OG) models are different: in this paper, westudy how they are different, and why. We investigate the welfare properties of...

This paper analyzes empirically the impact of fiscal policy on the price level for the cases of Germany and Spain. We investigate whether the fiscal theory of the price level (FTPL) is able to deliver a reasonable explanation for the different performances of the price level in these two...

A major criticism against staggered nominal contracts is that they give rise to the so called"persistency puzzle" – although they generate price inertia, they cannot account for thestylised fact of inflation persistence. It is thus commonly asserted that, in the context of thenew Phillips curve...

The paper investigates the effect of interest rate policy on price bubbles, trading behavior, and portfolio choice in experimental stock markets. In a series of experiments, participants trade an asset over 15 periods. Alternatively, the participants can invest money in interest-bearing bonds....

This paper investigates the effect of interest rate policy on stock marketbubbles and trading behavior in experimental asset markets. For this purpose, weintroduce the possibility of investing in interest bearing bonds to the classicallaboratory asset market design of Smith, Suchanek, and...