Monetary authorities during a hyperinflation occasionally extract seignorage and then abandon the currency. Modelling the central bank as an exhaustible resource extracting monopolist that equates average and marginal profit to extract remaining seignorage by the optimal stopping time explains...

This paper reviews theory and evidence of the welfare effects of inflation from a costbenefit perspective. Basic models and selected empirical results are discussed. Historically, in assessing the welfare effects of inflation, the distortion of money demand played a prominent role. More...

This paper reviews the key economic issues concerning the welfare costs of inflation and deflation, with a view to shedding light on the desirable properties of the inflation process. Our review of the evidence on the overall costs of inflation and deflation indicates that such costs could be...

We test the quantity theory of money (QTM) using a novel approach and a large new sample. We do not follow the usual approach of first differentiating the logarithm of the Cambridge equation to obtain an equation relating the growth rate of real GDP, the growth rate of money and inflation. These...

This paper argues that the 'fiscal theory of the price level' (FTPL) is fallacious. The source of the fallacy is an elementary economic misspecification. The FTPL denies a fundamental property of any model of a market economy, that the budget constraint of any agent, private or public, must be...

The recent surge in consumer prices beginning in 2021 has been attributed by government officials to supply chain disruptions, war in Ukraine, the coronavirus pandemic, and corporate greed. Between 2008Q4 and 2021Q1 the consumer price index (CPI) increased 32 percent from about 211 to 280....

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 -...

In this paper we contribute to the literature on environments with active fiscal and accommodating monetary policy. We show that this framework is able to explain the positive relationship between the steady state level of inflation and business cycle inflation volatility observable in the data....

Bitcoin has enabled competition between digital cryptocurrencies and traditional legal tender fiat currencies. Despite rapidly increasing acceptance, so far the affirmation of cryptocurrency as better money has been thwarted by dramatic deflationary price instability. Successful at disposing of...

Models of monetary expansion, following Friedman (1969), tend to abstract away from the relative price effects of monetary policy by assuming that the central bank distributes money directly to agents via helicopter. However, in light of the recent entertainment of helicopter drops as a...