The main issue discussed in the supply shock literature that followed the oil and food price shocks of the seventies was whether to accommodate. The supply shock reduces the equilibrium level of output, and monetary policy can not affect that. But in the seventies supply shocks were also...

The paper sets out and analyzes a simple model of money, banking, and price level determination. The model is first used to illustrate recent developments in the theory and analysis of banking, particularly the distinction between the portfolio management services provided by banks and their...

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...

Optimal portfolios differ according to the length of time they are held without being rebalanced. For the case in which asset returns are identically and independently distributed, it has been shown that optimal portfolios become less diversified as the holding period lengthens.We show that the...

This paper analyzes the behavior of the current account and the exchange rate in the British economy during the 1970's, and discusses the outlook, as influenced by the availability of oil revenues, for exchange rate developments during the 1980's.Both trade and exchange rate behavior are...