According to the logic of the Friedman rule, the opportunity cost of holding money faced by private agents should equal the social cost of creating additional fiat money. Thus nominal rates of interest should be zero. This logic has been shown to be correct in a number of contexts, with and without various distortions. In practice, however, economies that have confronted very low nominal rates ...

Conducti ng monetary policy is a difficult business. It's easy enough to set a policy goal such as price stability or low and stable inflation , but because monetary policy affects the economy with a lag, achieving those goals requires an ability to peer into the future. A change in the money supply or interest rates today won't affect inflation for months, or even years, down the road. Consequ...

L ike any practical, policy-oriented discipline, monetary economics employs useful concepts long after their prototypes and originators are forgotten. A case in point is the notion of a velocity function relating money’s rate of turnover to its independent determining variables. Most economists recognize Milton Friedman’s influential 1956 version of the function. Written v = Y/M = v(rb, re, 1/P...

Central banks in developing countries are increasingly turning to maintaining a low inflation rate as the central target of monetary policy, without much consideration for how these policies impact the real economy – outcomes like employment, investment and economic growth. In this paper, we consider the employment costs of inflation reduction in developing countries from a gender perspective. ...

T   he completed MCI includes three main channels of interest rate, exchange rate and credit rate. In developing countries such as Iran, this indicator, which contains a credit channel, could be better used to illustrate the country’s monetary condition. This study has been done to calculate this index for the period of 1978–2012. For this purpose, the function of the total economy demand ...

This paper constructs a real business cycle model in which real money balances yield utility. I calibrate the model to fit the first moments of U.S. data and I simulate a set of impulse response functions that are generated by the model for GDP, the rate of interest, money growth, and real balances. These theoretical impulse responses are compared with actual impulse responses from U.S. data. T...