We study a dynamic equilibrium model in which agents have adaptive expectations and monetary authorities pursue an inflation target. We show how alternative monetary stabilization policies become more effective when fiscal constraints on deficits are implemented, although they are not binding at the equilibrium target. In particular, we show that the inflation target equilibrium can be locally,...

the subject of monetary policy orientation and tailoring a framework within which the credibility and desirability of the policies and the policy makers is enhanced, while the most important goal of policies, i.e reaching to and preserving a low and stable inflation rate is achieved, has recently been a controversial issue for a large number of economists. in fact the necessity arised since the...

Recently the Bundesbank claimed that monetary targeting has become considerably more di cult by the increased volatility of short term money growth The present paper investigates the impact of German money growth volatility on income velocity and money demand in view of Friedman s money growth volatility hypothesis Granger causality tests provide some evidence for a velocity volatility linkage ...

This paper analyzes the implications of a balanced budget scal policy rule for the determi-nacy of the price level in a cash{in{advance economy under three alternative monetary policy regimes. It shows that in such stylized models with exible prices and a period{by{period balanced budget requirement the price level is determinate under a money growth rate peg and is indeterminate under a pure n...

the main challenge of developing countries, is achieving growth and development. review of economic growth literature shows that the quality of institutions and social infrastructure are important factors that influence the economic growth and development. also many analysts believe that between institutional factors, the rule of law is one of the most elements for appropriate system for invest...

Theories on the relationship between money and inflation had largely been shaped around the positive relationship and money causality for inflation before the Post-Keynesians. Since the 1980s, this idea emerged that there might be no correlation between money growth and inflation. In the case of existence, the causality is reversed, so money is endogenous somehow. However, practically there is ...

Rational expectations macroeconomic models frequently possess an embarrassingly large number of equilibria. One of these equilibria is the familiar neoclassical solution in which t1 e price level grows at the rate of monetary expansion but there are others in which the price level is either explosive or implosive even in models with a constant nominal supply of money. Under certain conditions i...

Seitz and Tödter argue, counter to Svensson, that the P ¤ model provides a rationale for money-growth targeting. In particular, they argue that " money growth targeting is a special form of in ‡ation forecast targeting based on a 'limited' information set. In contrast to 'full information' in ‡ation forecast targeting, money growth targeting is likely to be more robust under changing conditions...

We design and study the behavior of experimental overlapping generations economies in which the government either finances real deficits through seignorage or allows money supply to grow at a predetermined rate. We provide experimental data to study the conjecture that a “simple” rule, such as a constant growth of the money supply, can help coordinate agents’ beliefs and help stabilize the econ...

The Federal Reserve Bank of Cleveland has publicly endorsed a legislative resolution that would make zero inflation, or price-level stability, the overriding long-run objective of the Federal Reserve System. Price-level stability means a policy intended to keep the price level reasonably constant over long horizons. That is, although the price level may fluctuate temporarily in response to tran...