A Farmer-type Keynesian model is constructed to explore and exposit Keynesian ideas. The modeling innovation is to integrate Farmer’s approach with monetary exchange and to derive optimal monetary and fiscal policies. Two approaches are taken to optimal policy an approach in the spirit of New Keynesian sticky-wage-and-price models, and an a "sophisticated policy" approach. Optimal policies typi...

This paper uses a New Monetarist framework to study the trade of indivisible goods with divisible money in a frictional market. We first derive conditions under which stationary equilibrium exists, and then show that if equilibrium exits, it is unique. The uniqueness result is due to the commitment and coordination nature of the pricing mechanisms. Money is superneutral in the model with genera...

Milton Friedman's contention that the crucial theoretical difference between Keynesians and monetarists is that Keynesians assume rigid prices is shown to be factually and logically wrong. Distinctively monetarist propositions and prescriptions depend not on price flexibility but on the assumed insensitivity of monetary velocity to interest rates. To avoid this assumption, Friedman's second "mo...

Wartime periods have frequently been treated as natural macroeconomic experiments, but the international pooled time series evidence presented here shows that the literature has overemphasized the experience of the United States and the United Kingdom. Wars fought exclusively on foreign soil do have marginally higher real output growth than peacetime periods, but real growth during all other wa...

A. Topics and Tools ............................................................................ 1 B. The Lucas Model in Historical Perspective............................................ 2 Keynesian macroeconomics in the 1960s ......................................................................... 2 Monetarism .....................................................................................

This paper uses a New Monetarist framework to study the trade of indivisible goods with divisible money in a frictional market. We first derive conditions under which stationary equilibrium exists, and then show that if equilibrium exits, it is unique. The uniqueness result is due to the commitment and coordination nature of the pricing mechanisms. Money is superneutral in the model with genera...

We investigate how a positive relation between inflation and capital investment (the Mundell–Tobin effect, MT-E) affects optimal monetary policy in framework that combines overlapping generations new Monetarist models. find rates above the Friedman rule are if only there is an MT-E. In absence of MT-E, optimal. With increasing leads to first-order welfare gain from investment, second-order loss...

A. Topics and Tools ............................................................................ 1 B. The Lucas Model in Historical Perspective ............................................ 2 Keynesian macroeconomics in the 1960s ......................................................................... 2 Monetarism ....................................................................................