The Modigliani-Miller theorem is fundamental to the theory of corporate finance. One of the theorem's immediate implications is that there is no reason for the monetary authority to respond to asset prices. This article posits a world in which the Modigliani-Miller theorem does not hold. The...

An argument that an interest rate peg is desirable because it mitigates the distortions that arise in a monetary economy, and that money growth should be procyclical in order to achieve the interest rate peg.

What rule should a central bank interested in inflation stability follow? Because monetary policy tends to work with lags, it is tempting to use inflation forecasts to generate policy advice. This article, however, suggests that the use of forecasts to drive policy is potentially destabilizing....

A traditional function of the central bank is to control the price level. The fiscal theory of the price level challenges this assumption, arguing instead that the fiscal authority's budgetary policy is the primary determinant of the price level. The authors provide a critical review of the...

A comparison of a simple two-bracket income tax code with an approximation to traditional structures that entail steeply rising marginal tax rates, showing that the simpler rate structures are not necessarily more efficient than alternatives with many, highly progressive brackets.

An argument that raising federal revenues through suspending indexation of the personal income-tax code is inefficient in that it is inferior to direct increases in marginal tax rates.

The authors use a stylized model of the economy to analyze how permanent and temporary increases in government expenditure--and the timing of taxation used to finance them--affect aggregate output and other variables that describe the economy.

A review of four papers that model market-based (as opposed to regulatory-based) forces driving the asset-backed lending market, revealing that under certain conditions, the information costs that make financial markets important as conduits of credit can also create nonregulatory incentives for...

An argument that adverse selection in the labor market can explain why frequent job-changers have lower average wages and flatter age-earnings profiles than workers who change jobs infrequently. Adverse selection also provides a basis for examining the welfare implications of low-productivity...

An examination of the commonly accepted positive correlation between money and real output, including a review of several models of business cycles and an explanation of how money can be neutral and yet still appear to affect real output.