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Journal Article
The link between money and prices : 1971-76
Journal Article
The quantity theory of money
Journal Article
The redefined monetary aggregates
Report
Money is memory
This paper examines the sets of feasible allocations in a large class of economic environments in which commitment is impossible (the standard definition of feasibility is adapted to take account of the lack of commitment). The environments feature either memory or money. Memory is defined as knowledge on the part of an agent of the full histories of all agents with whom he has had direct or indirect contact in the past. Money is defined as an object that does not enter preferences or production and is available in fixed supply. The main proposition proves that any allocation that is feasible ...
Working Paper
The transition from barter to fiat money
How did it become possible to exchange apparently valueless pieces of paper for goods? This paper provides an equilibrium account of the transition between barter and fiat money regimes. The explanation relies on the intervention of a self-interested government which must be able to promise credibly to limit the issue of money. To achieve credibility, the government must offset the benefits of seigniorage by internalizing some of the macroeconomic externalities generated by the issue of fiat money. The government's patience and the extent of its involvement in the economy are key determinants ...
Working Paper
Cointegration and a test of the quantity theory of money
The main implication of the Quantity Theory of Money is that long-run movements in the price level are determined primarily by long-run movements in the excess of money over real output. This implication is related to the concept of cointegration discussed in Granger (1986), which states cointegrated multiple time series share common long-run movements. It is shown that the general price level is cointegrated with money, real output, and the nominal rate of interest. These economic variables enter a price equation based on the Equation of Exchange. Furthermore, the appearance of this ...
Working Paper
Endogenous financial innovation and the demand for money
This paper embeds two key ideas about the nature of financial innovation taken from the empirical literature into a familiar equilibrium monetary model. It provides formal support for several alternative econometric specifications for money demand that attempt to capture the effects of financial innovation and demonstrates that a popular theoretical model of money demand, when suitably modified, can account for some unusual monetary dynamics found in the data. Thus, it helps to establish both the theoretical relevance of recent empirical work and the empirical relevance of recent theoretical ...
Journal Article
Fisher and Wicksell on the quantity theory
Journal Article
In order to form a more perfect monetary union
Why did states agree to a U.S. Constitution that prohibits them from issuing their own money? This article argues that two common answers to this question?a fear of inflation and a desire to control what money qualifies as legal tender?do not fit the facts. The article proposes a better answer: a desire to form a viable monetary union that both eliminates the variability of exchange rates between various forms of money and avoids the seigniorage problem that otherwise occurs in a fixed exchange rate system. Supporting evidence is offered from three periods of U.S. history: the colonial period ...