O ne of the more important challenges facing policymakers is that of assessing inflation expectations. Goodfriend (1997) points out that one can interpret the meaning of a given interest rate policy action primarily in terms of its impact on the real rate of interest. However, evaluating this impact requires not only that one understands the various links between the nominal rate and expected i...

Despite developments in error modeling in discrete objects and continuous fields, there exist substantial and largely unsolved conceptual problems in the domain of nominal fields. This article explores a novel strategy for uncertainty characterization in spatial categorical information. The proposed strategy is based on discriminant space, which is defined with essential properties or driving p...

This paper considers an asset model that generates a monetary equilibrium in which capital, government bonds, and fiat money are held as perfect substitutes. Due to a congestion effect, output per producer is a decreasing function of the aggregate capital stock, and this effect makes a legal restriction on capital accumulation welfare enhancing. The restriction considered is that the money to c...

This paper demonstrates that in a standard monetary model there exists real indeterminacy whenever the nominal interest rate moves too closely with the real rate. A particular example of such a policy is if the central bank were to target the inflation rate. This is not a knife-edge result. The conclusion is robust to (1) a wide range of calibrations, (2) a more general monetary policy that tar...

Results: Empirical analysis uses a dataset of nominal interest rates, money growth, income growth, changes in nominal exchange rate, and budget deficit. From the methodological point of view the paper involves vector autoregression model and Wald tests of Granger causality, followed by impulse response analysis while stationarity and the order of integration of the selected variables are confir...

Rational partisan theory’s exclusive focus on electoral uncertainty ignores the importance of policy uncertainty for the economy. I develop a theory of policy risk to account for this uncertainty. Using an innovative measure of electoral probabilities based on Iowa Electronic Markets futures data for the United States from 1988 to 2000, I test both theories. As predicted by rational partisan th...

This paper examines the interaction of G7 real exchange rates with real output and interest rate differentials. Using cointegration methods, we generally find a link between the real exchange rate and the real interest differential. This finding contrasts with the majority of the extant research on the real exchange rate real interest rate link. We then identify a new measure of the equilibrium...