This paper examines a mechanism of liquidity-preference fluctuations caused by people's learning behavior. % about the frequency of a liquidity shock. When observing a financial shock, they rationally update their belief so that the subjective probability of encountering it again is higher,...

Many public policy decisions require analytical and empirical knowledge concerning the size, growth, causes and consequences of the ‘underground economy”. This paper seeks to clarify the meaning of underground activity, updates various discrepancy and fiscal estimates of its size and growth,...

This paper empirically analyses the stability of the narrow money demand function (M1) in Turkey for the period 1950-2002. As part of the IMF-sponsored stabilisation programme, Turkey has been pursuing base money targets. To ascertain whether this policy framework satisfies the necessary...

Should one think of zero nominal interest rates as an undesirable liquidity trap or as the desirable Friedman rule? I use three different frameworks to discuss this issue. First, I restate Cole and Kocherlakota's (1998) analysis of Friedman's rule: short run increases in the money stock -...

Money demand is probably one of the most extensively studied economic relationship in applied economics. While useful surveys of existing literature are available, much of the attention has focused on the US. However, a considerable number of papers have recently been produced dealing with the...

This paper analyses the information content of M1 for euro area real GDP since the beginning of the 1980s. After a literature review on the empirical results in individual euro area countries we review some theoretical arguments why real narrow money growth might be an important determinant of...

In this study we mainly dealt with money demand in broad sense for the period between 1987(I) when significant reforms related with money policy of Turkey were realised, and 1999(IV) when drastic measures were taken to cope with inflation. Moreover, interrelation between real money demand used...

Using a simple single-equation approach, many studies have shown that the term structure of interest rates or its approximation – the term spread is a potentially useful indicator of future inflation and/or future real economic activity. We argue that these results may be biased due to the...

European Monetary Union will come into existence in 1999. This raises questions related to the monetary policy targets that will be adopted by the European Central Bank (ECB). For both likely candidates, targeting a money aggregate or an inflation target, the existence of a stable money demand...

What is the optimum quantity of money in a society? This paper answers this question both from the perspective of a utility maximizing model with real balances in the utility function, and employing an inventory theoretic model which focuses attention on the costs of transacting in different...