abstract t he relationship between public sector deficits and inflation is one of the important and controversial issues in the academic literature as well as in economic policy field. on the other hand, a major objective of macroeconomic policies is to foster economic growth and to keep inflation on a low level. so keeping the price stability plays an important role in determining the growth r...

The ‘noise trader’ model of De Long et al. provides a plausible account of the determination of the equity premium. Extension of the model to allow for privatization of publicly-owned assets yields insights into the positive political economy of privatization and into the normative question of how policies should be evaluated in the presence of mistaken beliefs. JEL Classification: E62

Analytical expectational stability results are obtained for both Euler-equation and infinitehorizon adaptive learning in a simple stochastic growth model. The rational expectations equilibrium is stable under both types of learning, though there are differences in the learning dynamics. JEL Classification: E62, D84, E21, E43.

We use mutual fund flows as a measure of individual investor sentiment for different stocks, and find that high sentiment predicts low future returns. Fund flows are dumb money–by reallocating across different mutual funds, retail investors reduce their wealth in the long run. This dumb money effect is related to the value effect: high sentiment stocks tend to be growth stocks. High sentiment a...

This paper analyzes the relationship between money and inflation in a small open economy, where domestic and foreign currencies are perfect substitutes as means of payment. It is shown that, if the path of domestic money supply is such that individuals find it optimal to change the currency in which transactions are settled, there will be an adjustment period during which domestic inflation adj...

Differential tax analysis is used to show how the optimal mix of inflation tax and direct taxation changes with the relative size of the hidden economy. The larger the relative size of the hidden economy, the smaller the optimal ratio of direct tax to inflation tax. Anecdotal empirical evidence supports this result. JEL Classification: E62, H21, H26, O17.

This paper employs Roback’s locational-equilibrium model of public-goods pricing, crosssectional data from the Census of Population and Housing, and SMSA-level estimates of public capital stocks in order to examine the productive contribution of public capital. I find that public capital has a small positive impact on private output. JEL classification codes: E62, R53

The decline in cash revenue in Russia has been the key macroeconomic policy failure of the transition. During 1994–98, a sharp deterioration in cash compliance was offset by a rise in non-cash revenue, as the government increasingly financed its spending through mutual arrears write-offs. This paper argues that the fall in cash compliance emerged when money printing was replaced with a method o...

We document that government spending multipliers depend on the population age structure. Using variation in military and birth rates across US states, we show local fiscal multiplier is 1.5 increases with share of young people, implying 1.1–1.9 interquartile range. A parsimonious life cycle open economy New Keynesian model credit market imperfections age-specific differences labor supply demand...

This paper examines the role of collateralized money supply for short-run macroeconomic effects of monetary policy. We apply a simple sticky price model, where the central bank supplies money in exchange for securities that are discounted with the nominal interest rate. The central assumption is that only government bonds are eligible as collateral. If they are dominated in rate of return by pr...