The simplest macroeconomic models in which markets clear instantaneously, and expectations are rational preclude the existence of "business cycles," that is, of serially correlated deviations of output from trend. This paper studies one of several mechanisms that can be used to make these...

Modern theory has delivered both the conservative central banker and the principal-agent approaches as rationales for the independence of the central bank. The principal-agent approach directs attention to the importance of both clearly defining the goals of the central bank and its command in...

The organization of the paper is simple. We start by examining the real effects of anticipated inflation in an economy that has fully adapted to inflation. In particular, in this economy: (i) public institutions are fully attuned to inflation (or inflation proof), (ii) the same is true of...

Twenty five years after the publication of the second edition, this paper describes and evaluates the Contributions to monetary and macroeconomics made in Don Patinkin's Money, Interest, and Prices (MIP). Its first accomplishment was to settle definitively many issues, such as the valid and...

Inflation persists at moderate rates of 15-30 percent in all the countries that successfully reduced triple digit inflations in the 1980s. Several other countries, for example Colombia, have experienced moderate inflation for prolonged periods. In this paper we first set out theories of...

Increasing integration of the world economy, in both trade and capital markets, holds out the promise of mutual gains to countries from the coordination of their macroeconomic policy decisions. In this paper I describe the theoretical case for coordination, evaluate empirical estimates of the...

Privatization of state assets is an essential step to the creation of a viable private sector in the formerly socialist economies of Eastern Europe and the Soviet Union. A standard approach to the problem has rapidly emerged. Small firms are being privatized by sale very rapidly. The strategy...

The 1980s were both the lost decade of growth for much of Latin America and Africa, and the period in which -- through the new growth theory -- macroeconomists returned to the study of growth and development. The new growth theory is production function driven and concerned primarily with steady...

A given amount of seigniorage revenue can be collected at either a high or a low rate of inflation. Thus there ray be two equilibria when a government finances its deficit by printing money--implying that an economy may be stuck in a high inflation equilibrium when, with the same fiscal policy,...