We demonstrate that previous tests of money and fiscal "policy ineffectiveness" are likely to be biased because they ignore interaction effects between policies, induced either by direct policy linkages or through the variation of policies in response to common factors. Our analysis takes into...

This paper analyzes the extent to which Japan's success at maintaining a low and stable inflation rate since the mid-1970s, while avoiding a major recession, is attributable to a switch in monetary control procedures by the Bank of Japan toward a so-called "money focused" monetary policy....

Recent empirical studies have found that consumption is more sensitive to current income than simple versions of the life-cycle, permanent income hypothesis would predict. The present paper studies a model in which the fraction of consumers exhibiting excess sensitivity is endogenously...

This paper develops a simple rational expectations model of the inflation process that is used to test the Fisher effect. The model emphasizes the link between money and expected inflation, and hence the monetary regime followed by the central bank. The model is estimated with U.S. data over the...