We prove the existence of stationary monetary equilibrium with inflation in a “Bewley” model with constant aggregate real variables but with idiosyncratic shocks to the endowments of a continuum of individual agents, when a central bank stands ready to borrow or lend fiat money at a fixed...

We argue that real uncertainty itself causes long-run nominal inflation. Consider an infinite horizon cash-in-advance economy with a representative agent and real uncertainty, modeled by independent, identically distributed endowments. Suppose the central bank fixes the nominal rate of interest....

Summary A process X is observed continuously in time; it behaves like Brownian motion with drift, which changes from zero to a known constant ϑ0 at some time τ that is not directly observable. It is important to detect this change when it happens, and we attempt to do so by selecting a stopping...