This paper analyses the effects of open market operations on interest rates in a model in which agents must pay a fixed cost to exchange assets and cash. Asset markets are endogenously segmented in that some agents choose to pay the fixed cost and some do not. When the fixed cost is zero, the...

This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only...

We exposit the link between money, velocity and prices in an inventory-theoretic model of the demand for money and explore the extent to which such a model can account for the short-run volatility of velocity, the negative correlation of velocity and the ratio of money to consumption, and the...

We examine the impact of monetary injections in the Grossman-Weiss-Rotemberg Model and show that monetary shocks can lead to nominal exchange rates that are more volatile than inflation, money growth or interest rate differentials. Moreover, movements in real exchange rates following monetary...

We present a pricing kernel that summarizes well the main features of the dynamics of interest rates and risk in postwar U.S. data and use it to uncover how the pricing kernel has moved with the short rate in this data. Our findings imply that standard monetary models miss an essential link...

Is the exchange rate or the money growth rate the better instrument of monetary policy? A common argument is that the exchange rate has a natural advantage because it is more transparent: it is easier for the public to monitor than the money growth rate. We formalize this argument in a simple...

We study the general equilibrium effects of social insurance on the transition in a model in which the process of moving workers from matches in the state sector to new matches in the private sector takes time and involves uncertainty. We find that adding social insurance may slow transition....

Are deflation and depression empirically linked? No, concludes a broad historical study of inflation and real output growth rates. Deflation and depression do seem to have been linked during the 1930s. But in the rest of the data for 17 countries and more than 100 years, there is virtually no...

In this paper, we build a version of the putty-clay model in which there is a large variety of types of capital goods which are combined with energy in different fixed proportions. Our principal contribution is to establish easily checked conditions under which the problem of solving for the...

In the manufacturing sector of the U.S. economy, nearly 9% of output is not accounted for as payments to either physical capital or labor. The value of this output is a little larger than the value of the stock of physical capital. We build a model to measure how much of this output can be...