For competitive economies in which the real rate of return on money is too low, the standard prescription is to engineer a deflation—that is, to operate monetary policy according to the Friedman rule. Implicit in this recommendation is the availability of a lump-sum tax instrument. In this...

The business of money creation is conceptually distinct from that of intermediation. Yet, these two activities are frequently--but not always--combined together in the form of a banking system. We develop a simple model to examine the question: When is banking essential? There is a role for...

Several recent papers report evidence of an apparent statistical bias in inflation expectations and interpret these findings as overturning the rational expectations hypothesis. In this paper, we investigate the validity of such an interpretation. We present a computational dynamic general...