INFORMATIONAL IMPLICATIONS OF MONEY, INTEREST RATE, and PRICE RULES

The information available to private agents determines the effectiveness of various types of monetary policy. In an economy in which private agents have differential information sets, the ranking of three classes of monetary policy rules critically depends on the specification of agents' information sets. A price rule, for example, minimizes the variance of output around its full information level when agents observe both the interest rate and money stock. More generally, if all three monetary policy variables (the money stock, the price level and the interest rate) are contemporaneously observed, the policy ranking is indeterminate.     

UNCERTAIN EFFECTS OF MONEY AND THE LINK BETWEEN THE INFLATION RATE AND INFLATION UNCERTAINTY

In the postwar period high rates of inflation are associated with high levels of inflation uncertainty. In this paper I argue that the inflation rate and inflation uncertainty are linked by forecasters' uncertainty about the impact of money growth on the price level, and I present evidence indicating that this has been the case. As long as the impact of money growth on the price level remains unpredictable, then even predictable money growth will cause inflation uncertainty with its accompanying adverse effects on employment and output.     

Roles of Stock Price and Exchange Rate in Slovakia's Money Demand Function and Policy Implications

The demand for real M1 in Slovakia is positively influenced by real output and the stock price and negatively associated with the deposit rate, depreciation of the koruna, the euro interest rate, and the expected inflation rate. Considering the goods and the money market simultaneously, these results suggest that a higher stock price may or may not cause real output to rise and that a depreciation of the koruna or a higher euro interest rate would help raise Slovakia's real output. The coefficients of the deposit rate and the stock price in real M2 demand are insignificant at the 10% level. The likelihood ratio test in the extended Box–Cox model shows that the double-log form cannot be rejected at the 5% level while the linear form can be rejected at the 5% level. The CUSUM and CUSUMSQ tests show that the money demand function was relatively stable.      

2011年：宽松货币政策实施与退出的“滞胀”效应——来自2002～2010年货币存量变动研究的见解

通过对2002～2010年我国货币存量、价格波动与产出增长关系的实证研究,有两个重要的发现：一是一个高的货币存量增长率会带来物价上涨的趋势,而抑制物价上涨的根本之策是降低货币增长率;二是2009～2010年实施的宽松货币政策对产出增长的短期效应开始消褪,而价格则进入了一个上升通道,＂滞胀＂风险已经出现,因而中央银行转向降低通胀的一个明确的货币政策规则应是优选的政策目标。     

FINANCIAL INNOVATION, PRICE SMOOTHING, AND MONETARY POLICY

This paper examines an unregulated transaction services market that is subject to financial innovation in an economy that experiences aggregate supply and demand shocks. The availability of this unregulated market to transactors smooths the price response to these shocks. However, financial innovations act as money supply shocks that increase price disturbances. If there is persistence in the real aggregate supply shocks and in the rate of adoption of financial innovations, then the central bank can forecast some portion of the changes in transaction requirements that accompany these shocks and damp the residual variation in prices by accommodating these anticipated needs.     

COULD STABLE MONEY HAVE AVERTED THE GREAT CONTRACTION?

We test the hypothesis that the Great Contraction would have been attenuated had the Federal Reserve not allowed the money stock to decline. We simulate a model that estimates separate relations for output and the price level and assumes that output and price dynamics are not especially sensitive to policy changes. The simulations include a strong and a weak form of Friedman's constant money growth rule. The results support the hypothesis that the Great Contraction would have been mitigated and shortened had the Federal Reserve followed a constant money growth rule.     

The ENDOGENEITY OF MONEY DURING THE GERMAN HYPERINFLATION: A REAPPRAISAL

This paper provides evidence that casts doubt on the conclusioon of several studies of the German hyperinflation that, since government raised most of its revenue from money creation, the money supply process was endogenous. This conclusion in the literature is based on the assumption that the money supply and the price level can be described by linear ARIMA models. It is shown here that the linearity assumption is violated by the data and that relaxing this assumption reverses the earlier results. The paper provides additional evidence in support of the finding that the money supply process may be exogenous.     

A CLARIFICATION OF THE EXCESS DEMAND FOR OR EXCESS SUPPLY OF MONEY

One of the most misunderstood and neglected concepts in all of economics is the notion that money may be in excess supply or excess demand. The article presents several reasons why monetary disequilibrium would indeed persist, including the fact that no "money market" exists with a single price which would clear that market. Contrary to the claims of several leading textbooks, the article explains why changes in the interest rate would not immediately eliminate an excess supply of or demand for money.     

MONEY AND PRODUCT QUALITY UNDER ASYMMETRIC INFORMATION

This article examines the effects of money on product quality, as well as the price pattern of heterogeneous quality goods, in a search‐theoretical monetary model with divisible money and divisible commodities. We establish the existence and uniqueness/multiplicity of monetary equilibrium in several different cases. The steady‐state equilibrium of our model displays several properties that are absent or distinct from those of previous studies. In particular, we find that under egalitarian bargaining, the Friedman rule cannot achieve socially efficient allocation due to asymmetric information. We find that the price of informed high‐quality goods is higher than the price of uninformed quality goods. We also find that an increase in inflation can improve product quality. (JEL E40)     

A DIFFICULTY WITH MONETARIST MODELS OF HYPERINFLATION

The Cagan, Barro, and Allais analyses of hyperinflation have been shown to be questionable. Their impressive empirical results are a direct result of the method used to solve their models. Their solution does not depend on the input forcing function (the rate of change of the money stock) of their differential equation systems but expresses one dependent variable, real money balances, as a function of another dependent variable, the rate of change of prices. As a result, price changes which are unrelated to changes in the money stock acting through the dynamic structure of the model will incorrectly yield a good fit of the data.     

PRICE LEVEL UNCERTAINTY, SAVING, AND LABOR SUPPLY

This paper derives the implications, for individual saving and labor supply, of increased uncertainty about the future price level. The framework for the analysis is a two-period model in which saving and labor supply are alternative sources of both present disutility and future income. The individual is assumed to make simultaneously his saving and labor supply decisions prior to the resolution of the uncertainty about the future price level. We find that, under theoretically plausible and empirically relevant assumptions about attitudes toward risk, an increase in future price level uncertainty increases individual saving and labor supply. These results imply that, for the economy as a whole, increased uncertainty about the future price level increases output and employment, while decreasing the real rate of interest, the present price level, and economic welfare.     

The Role of Monthly Spending Money in College Student Drinking Behaviors and Their Consequences

Objective: Alcohol use among college students is pervasive and affected by economic factors such as personal income and alcohol price. The authors examined the relationship among students' spending money, drinking rate, and alcohol-related consequences.

Participants: In 2005, the authors conducted a Web-based survey among a random sample of 3,634 undergraduate students from 2 large universities.

Methods: The authors used multiple logistic regression to model drinking behaviors and multiple linear regression to model alcohol-related consequences.

Results: The lowest reported levels of average monthly spending money were associated with reduced levels of drinking and getting drunk. Spending money was independently associated with experiencing alcohol-related consequences caused by a student's own drinking, even after the authors controlled for personal drinking behaviors. The effects for consequences caused by others' drinking were significant for students who had gotten drunk.

Conclusions: These findings have implications for alcohol price and marketing, particularly around colleges, and suggest actions for parents to consider.     

THE SWINGS OF U.S. INFLATION AND THE GIBSON PARADOX

In recent business cycles, U.S. inflation has experienced a reduction of volatility and a severe weakening in the correlation to the nominal interest rate (Gibson paradox). We examine these facts in an estimated dynamic stochastic general equilibrium model with money. Our findings point at a flatter New Keynesian Phillips Curve (higher price stickiness) and a lower persistence of markup shocks as the main explanatory factors. In addition, a higher interest‐rate elasticity of money demand, an increasing role of demand‐side shocks, and a less systematic behavior of Fed's monetary policy also account for the recent patterns of U.S. inflation dynamics. (JEL E32, E47)     

Time Construction in Insurance Society

This article deals with the social meaning of insurance contracts in the late medieval and modern society. Starting from the empirical analysis of one of the early marine insurance contracts which were stipulated in the second half of the 14^th century, the hypothesis is suggested that the premium rate coincides with the estimated average frequency of sea accidents. By means of a proto‐probability calculus, rate was used by the early insurers for trading risks. Therefore the main thesis arises that insurance premium is a way of giving a certain price to the uncertainty of the future and that it indeed represents the cost of such observation. A comparison with the original function of money in primitive societies based on reciprocity is finally developed in order to explain how time construction is contingent on social structures.     

STICKY PRICE AND STICKY INFORMATION PRICE‐SETTING MODELS: WHAT IS THE DIFFERENCE?

Using a partial equilibrium framework, Mankiw and Reis show that a sticky information model can generate a lagged and gradual inflation response after a monetary policy shock, whereas a sticky price model cannot. Our study demonstrates that the finding is sensitive to their model's parameterization. To determine a plausible parameterization, we specify a general equilibrium model with sticky information. In that model, we find that inflation peaks only one period after a monetary disturbance. A sensitivity analysis of our results reveals that the inflation peak is delayed by including real rigidities when the monetary policy instrument is money growth, whereas inflation peaks immediately when the policy instrument is the nominal interest rate. ( JEL E31, E32, E52)     

Nominal and Real Disturbances and Money Demand in Chinese Hyperinflation

This article reexamines the dynamics of hyperinflation by allowing variability in the relative price of capital goods in units of consumption goods that reflects interactions between the real and monetary sectors. The theory generates empirically testable implications that suggest expanding the standard Caganian money demand function to include both anticipated inflation and relative price effects in a nonlinear fashion. Employing data from the post–WW II Chinese hyperinflationary episode, the empirical findings suggest that conventional econometric investigations of money demand during hyperinflation overlook important nonlinear interactions between real and monetary activities and, hence, underestimate the welfare costs of hyperinflation.     

OUR NEW MONETARY STANDARD: THE MEASUREMENT AND EFFECTS OF PRICE UNCERTAINTY, 1880–1973*

U. S. annual inflation rates over the last century are analyzed in an attempt to compare price unpredictability in the recent period with that during the 1880–1915 gold standard period. The movement from negative price change autocorrelations in the earlier period to strongly positive price change autocorrelations in the recent period, is shown to imply an upward shift in the amount of long-term relative to short-term price uncertainty. Empirical evidence on the relationship between the demand for money and actual price change, on the adjustment of interest rates to price changes and on the change in the composition of new corporate debt issues is presented. Evidence suggests that only over the last decade has the public generally recognized the fundamental change from a commodity to a fiduciary standard that has occurred in the underlying monetary framework.     

DURABILITY, MAINTENANCE AND THE PRICE OF USED ASSETS

This paper considers assets whose service flow decays at a rate determined by built-in durability and the level of maintenance. A cost minimization model determines optimal durability and maintenance and shows how these variables respond to changes in interest rates, the price of maintenance, and the cost of new assets. The price of old assets adjusts so that the cost of services from both old and new assets is the same. The model provides a framework for analyzing data on automobile scrapping rates and repair expenditures. Data for postwar United States show that scrapping rates are sensitive to the price of repairs relative to the price of new cars. The amount of repairs per car also responds to the relative repair price .     

STOCHASTIC INFLATION AND THE OPTIMAL POLICY OF PRICE ADJUSTMENT

This paper analyzes the optimal policy of price adjustment for a monopolistic firm in the presence of stochastic inflation. It shows that an increase in the expected rate of inflation or in the cost of price adjustment leads to an increase in the initial real price and a decrease in the terminal real price in each period with a fixed nominal price. It also shows that the effects of increased riskiness of inflation are ambiguous.