By Apostolos Serletis
This e-book offers an account of the prevailing literature at the call for for cash. It exhibits how the money call for functionality suits into static and dynamic macroeconomic analyses and discusses the matter of the definition (aggregation) of cash. Professor Serletis takes a microeconomic- and aggregation-theoretic method of the call for for funds, offers empirical proof utilizing contemporary state of the art econometric method, and acknowledges the lifestyles of unsolved difficulties and the necessity for additional developments.
New to this Edition
* elevated assurance of theoretical and empirical methods to the call for for funds, together with a brand new bankruptcy on cross-country evidence
* a brand new bankruptcy on cash call for concerns and estimation of the welfare price of inflation utilizing instruments from public finance and utilized microeconomics
* a brand new bankruptcy on rational expectancies macroeconomics and concerns equivalent to the Lucas critique, principles as opposed to discretion, and time inconsistency
* elevated assurance of the univariate and multivariate homes of the cash call for variables, nonlinear chaotic dynamics, and self-organized criticality
* revised insurance of financial asset call for structures in line with in the community and globally versatile useful forms
* elevated assurance of the econometrics of call for platforms highlighting the problem inherent with reaching either financial and econometric regularity
Read Online or Download The Demand for Money: Theoretical and Empirical Approaches (2nd Edition) PDF
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Extra resources for The Demand for Money: Theoretical and Empirical Approaches (2nd Edition)
Sample text
To evaluate this argument, let’s use the Barro-Gordon (1983) model of the previous section. 32). Clearly, the πd function is increasing in the marginal benefit of surprise inflation, α. Hence, policy measures that increase α, will increase the inflation rate, π, and reduce social welfare. Hence, wage indexation is good because it reduces α, making the expectational Phillips curve steeper, and increasing economic welfare by reducing the monetary authority’s incentive to create surprise inflation.
If this were not the case it would be possible to improve the forecast by incorporating the available information. 5) where α < 0 and Et pt+1 = Et (pt+1 |It ). Solving for pt we obtain pt = mt − γ − αEt pt+1 − ut . 6), however, is not a solution for pt , because of the expectational variable, Et pt+1 , on the right-hand side. To derive the rational expectation solution for this model’s endogenous variable, pt , we use the ‘minimal set of state variables (MSV)’ solution procedure — see McCallum (1989, Chapter 8) for more details.
The rules-type equilibrium, however, is often referred to as the ‘optimal, but time-inconsistent solution’ — see Kydland and Prescott (1977). The term ‘time-inconsistent’ refers to the policymaker’s incentives to deviate from the rule when economic agents expect it to be followed. 6. ’ In order to discuss the time-inconsistency problem, let’s calculate the value of π and L in the fooling solution, in which the public expects zero inflation but the monetary authority instead acts opportunistically and produces surprise inflation in order to reduce u below u∗ .