This paper presents an empirical investigation of the role of credit in the post-stabilization consumption booms of Mexico, Chile and Israel. Credit from the banking sector to the private sector expanded very rapidly following the stabilizations. I show that this increase in credit reduced the...

Almost all of the recent empirical tests of the rational expectations - permanent income hypothesis (RE-PIH) have rejected the hypothesis. The null hypothesis in this empirical literature typically consists of the joint hypothesis that 1) agents' expectations are formed rationally, 2) desired...

When government expenditures exceed current tax revenues, the resulting deficit must be financed either by issuing bonds, which imply obligations to levy future taxes, or by creating high-powered money. The choice between money and bonds is often thought to be of great moment for both real and...