Index of Names

Agenor, Pierre 194, 201 Aijagari, Rao 89 Aizenman, ]oshua 194,201 Akerlof, George A. 130 Amendola, Mario 214 Aoki, Masahiko 206,207,209 Arrow, Kenneth]. 35,58 Atkinson, Sir Anthony 244 Avery, Robert B. 119, 123 Azcue, P. 173n

Bailey, Martin ]. 96n, 97, 100-1, 107, 123, 132-3, 137, 139, 141

Balasko, Yves 57(nI9),58 Ball, Lawrence 122(ns), 124 Barnett, William A. 120, 124 Barro, Robert]. 23(n5), 25 Baumol, William]. 39, 58, 97, 116,

124 Belongia, Michael T. 123(n16), 124 Bernanke, Ben S. 24(n25), 25, 199(n9,

13),201 Beveridge, Michael 96n Bewley, Truman F. 108, 124, 140-1 Bisignano, ]oseph 167, 168 Black, Fischer 23(n7),25 Blanchard, Olivier]. 24(n13), 25,

57(nI2), 58, 244 Bomfirn, Antulio 197,201 Bowden, Roger 207, 209 Brock, William A. 122(n4), 123(nl1),

124 Brunner, Kar! 17, 18, 19-20, 24(n23),

25-6 Buiter, Willem H. 95(nl-2) Bullard, James 123(nlO), 124, 206,

209 Burdick, Clark A. 123(n8), 124

Cagan, Phillip 122(n3), 124 Calvo, Guillermo 57(nI2), 58, 192,

195,196,201 Canner, Glenn [119], 123

255

Canzoneri, Matthew 89 Cass, David 57(nI9),58 Chang Fwu-Ranq 116, 124 Chari, V. V. 57(n9), 58, 108, 111,

122(n5), 124 Christ, Carl 73, 89 Christiano, Lawrence]. 19,27,

57(n9), 58, 108, 111, 124 Clower, Robert 39,58,61,67 Cole, Harold L. 123(nI2), 124, 196,

201 Cooley, Thomas F. 107, 108, 123(n8),

124 Correia, Isabel 124 Cox Edwards, Alejandra 177,201 Creel, ]erome 244 Cumby, Robert E. 89

Day, Richard H. 211,214 De Gregorio, lose 122(n5), 124 De Pablo, ]uan-Carlos 198(nl),201 Debreu, Gerard 35, 58 Delli Gatti, Domenico 204, 209 Den Haan, Wouter J. 123(nI2), 124 Detemple, Jerome 57(n19),58 Diba, Behazd T. 89 Dickens, William T. 130 Dornbusch, Rudiger 198(n1),201 Dotsey, Michael 122(n5), 123(nI5),

124 Dreze, ]acques H. xv, 33-59, 65,

66-71 Dubey, Pradeep 56(n2) Duffy, lohn 23(n6), 206, 209 DUisenberg, Willem Frederik 15 Dupor, Bill 89 Dvoretzky, Aryeh 116, 124

Eckstein, Zvi 108, 125 Edwards, Sebastian 177, 201 Eichenbaum, Martin 19,27, S7(n9),

58 Elliehausen, Gregory E. [119], 123

256 Index of Names

Estrella, Arturo 159, 161, 168 Evans, George W. 94,95,175, 186,

201

Fama, Eugene 23(n7), 26 Farmer, Roger 205, 209 Feldstein, Martin 57(nI6), 58,

123(nlO), 125, 220, 244, 254 Fisher, Irving 6-7,8, 73,89 Fitoussi, jean-Paul xvi,24(n18),

215-44,245-54 Flandreau, Marc 244 Flemming, lohn 244 Frenkel, jacob 116, 125 Friedman, Milton xv, 8, 11, 14, 17, 19,

24(n15), 49, 58, 64, 65, 72, 89, 97, 105, 112, 122(n1), 125, 128, 130, 132, 141

Frisch, Helmut 254 Fuerst, Timothy 19, 26 Fusselman, jerry 123(n12), 125

Gaffard, jean-Luc 211-14 Galbraith, James K. 23(n8),24(n13),

26 Galiani, S. 173n Gallegati, M. 204, 209 Geanakoplos,j. D. 56(n2), 57(nI9), 58 GertIer, Mark 24(n25), 25, 89, 199(n9,

13),201 Geweke, john 89 Gilboa, I. 206,209 Gillman, Max 123(nI2), 125 Giovannetti, Giorgia 72n Goldfeld, Stephen M. 122(n2), 125 Gomme, Paul 122(n5), 125 Goodfriend, Marvin S. 57(n13),58,

97, 126, 133, 142 Gordon, David B. 23(n5), 25 Gordon, Robert]. 24(n13), 26, 237-8,

244 Gottardi, Piero 57(n19),58 Grandmont, jean-Michel 56(n3), 60-

5 Greenfield, Robert L. 23(n7), 26 Greenspan, Alan 4, 15, 151, 153, 154,

157, 197,201 Greenwald, Bruce 199(n9),201 Grossman, Sanford J. 123(nI2), 125

Guerrero, Frederico 173n Guger, Alois 254 Guidotti, Pablo E. 108, 125 Gurley, lohn 13, 26 Gyohten, Toyoo 150, 169

Haberler, Gottfried 248, 254 Hahn, Frank 67 Handler, Heinz 254 Hansen, Gary D. 107, 108, 123(n8),

124 Hansen, Lars P. 88, 89, 96n Hayek, Friedrich A. von 5-6, 28 Hertz,]. 206, 210 Heymann, Daniel xvi, 2, 23(n2),

24(n 17), 26, 129, 130, 173-203, 204-10,211-14

Hicks, Sir]ohn 211-14 Hodgman, D. 190,202 Honkapohja, Seppo 72n, [94], 95,

175, 186,201 Hoon, Hian Teck 24(nI3),26 Howitt, Peter W. 129, 130, 131,

198(n6),202

Ireland, Peter 122(n5), 124 Isard, Peter 254

jaffee, Dwight 190, 202 ]ones, Larry E. 72n, 122(n5), 124,

125 Jonung, Lars 170-2 Jovanovic, Boyan 116, 123(n13), 125

Kaminsky, Graciela 197,202 Karni, Edi 123(n12), 125 Katz, Lawrence F. 24(n13),25 Kaufman, Martin xvi, 23(n2),

24(n17), 173-203,204-10,211-14 Kehoe, Patrick]. 108, 111, 124 Kehoe, Timothy 196,201 Kendrick, lohn W. 122(n1) Kennickell, Arthur B. (119), 123 Keynes, John Maynard 7, 11,28, 141,

245 Kiguel, Miguel 182, 195,202 Kimbrough, Kent P. 108, 123(nI2),

125 King, Robert C. 57(n13), 58

Kiyotaki, Nobuhiro 56(n4), 57(nI2), 58,59,122,125,199(n9),202

Krogh, A. [206], 210 Krugman, Paul 195,202 Kurz, Mordecai 205, 210

Lafontaine, Oskar 254 Laidler, David E. W. 122(n2), 125,

128-31 Lamont,Owen 199(n9),202 Le Bihan, Herve 244 Leeper, Eric M. 89 Leiderman, Leonardo 108, 125, [182],

201 Leijonhufvud, Axel xiv-xvi, 1-27,

28-30, 72n, 129, 130, 173n, 199(n9), 202, 205, 206, 210, 213, 214

Lerais, Frederic 244 Lerner, Abba Ptachya (1903-83), 2 Liviatan, Nissan 182, 195,202 Lubrano, Michel 244 Lucas, Robert E.,]r. xv, xvi(n), 8, 18,

19, 24(n15), 27, 57(n16), 73, 79, 89,96-127,128-31,132-42,214

McAffee, P. 198(n6),202 McCallum, Bennett T. 95(nl, 3), 96n,

97, 126, 133, 142 McKinnon, Ronald 200(n15),202 MagilI, Michael]. P. 57(n19-20),59 Maia, lose 195,202 Malinvaud, Edmond 244 Mankiw, Gregory 57(n12),59 Manuelli, Rodolfo E. 122(n5), 124,

125 Marcet, Albert 89 Marimon, Ramon xv, 72-90, 92-5 Marin, Dalia 254 Marshall, Alfred 204, 210 Marty, Alvin L. 123(nI5), 126 Mas-Colell, Andreu 57(nI9),58 Mathieu, Catherine 244 Melitz, ]acques 28 Mellon, Andrew 243 Meltzer, Allan H. 17,18,19-20,27,

97, 120, 122(n2), 126 Mendoza, Enrique 195,201,202 Miller, Merton H. 116, 126

Index ofNames 257

Miller, Preston]. 108, 126 Minford, Patrick 205 Minsky, Hyman 199(n9),202 Mises, Ludwig E. von 5-6, 28 Mishkin, Frederic S. 159, 161, 168 Mitchell, M. 206,210 Modigliani, Franco 16,17,19,

57(nI8),59 Moore, lohn 199(n9),202 Mulligan, Casey B. 96n, 122(n2), 108,

119, 121, 126, 133, 142 Mundell, Robert 29-30, 216

Nakajima, Tomoyuki 96n Nicolini, ]uan P. 89, 173n Noussair, Charies N. 254

Obstfeld, Maurice 24(n26), 27, 183, 202

Orr, Daniel 116, 126 Ortiz, ] avier 195, 202 Ostroy, ]oseph M. 56(n4)

Palmer, R. G. [206], 210 Patinkin, Don 73,90, 116, 126 Peel, Sir Robert 25(n29) Perry, George I. 130 Phelps, Edmund S. 24(n13),26, 108,

126,140,142,234,238,244 Pill, Huw 200(n15),202 Plosser, Charies 24(n15), 211, 213,

214 Piott, Charies R. 254 Polemarchakis, Heracies M. xv, 33-59,

65, 66-71 Poterba, ]ames M. 120, 126

Quinzii, Martine 57(n19, 20), 59

Radner, Roy 37,59 Ramsey, Frank 111 Reinhart, Carmen 182, [182), 197,

201,202,203 Reizman, Raymond G. 254 Ricardo, David (1772-1823) 11 Roberds, William [88), 89 Rodriguez Mendezibal,

Hugo 123(nI2), 126 Rogerson, Richard 23(n8), 24(n13), 27

258 Index of Names

Rogoff, Kenneth 24(n26), 27,183,202 Roldos, ]orge 195, 203 Romer, Christina 254 Romer, David 254 Rotemberg, ]ulio]. 120, 126 RusselI, Stephen 123(nlO), 124

Saari, Donald G. 206,210 Sacco, Pier Luigi 204-10 Sachs, ]effrey 196, 200(n20), 203 Sala-i-Martin, Xavier 108, 119, 121,

122(n2), 126, 133, 142 Sanguinetti, Pablo xvi, 23(n2),

24(n17), 173-203,204-10,211-14 Santaella, ]ulio 180, 203 Sargent, Thomas]. 2, 23(n1), 27, [88],

88(n1), 89, 90, 175, 186,203,205, 206,210,230,254

Schmeidler, David 206, 209 Schwartz, Anna]. 17, 122(n1), 125 Screpanti, Ernesto 204,210 Seidel, Hans 248,254 Shaw, Edward S. 13,26 Shell, Karl 89 Shiller, RobertJ. 254 Sidrauski, Miguel 97, 126, 133, 142 Simon, Herbert A. 121,126 Sims, Christopher A. xv, 78, 90, 91, 95 Sinn, Hans-Werner 132-42 Solow, Robert 244 Staiger, Douglas 24(n13), 27 Starr, Ross M. 56(n4) Sterdyniak, Henri 244 Stiglitz,]oseph 24(n13), 27,190,191,

199(n9), 201, 202, 203 Stock, ]ames H. 24(n13), 27, 122(n2),

126 Stockman, Alan C. 123(nI2), 124 Stokey, Nancy L. 96n, 108,112,126 Streissler, Erich W. 24(nI8), 245-54 Summers, Lawrence 138,142 Sunder, Shyam 89

Talvi, Ernesto 195,203 Taylor, lohn B. 24(n26), 27, 57(nI2),

59-89 Teles, Pedro 89, 124 Thurow, Lester 243, 244 Tobin,]ames 7,8,16,17,18,39,

57(n17), 59, 116, 126 Tornell, Aaron [196, 200(n20)], 203 Tödter, Karl-Heinz 254

Uribe, Martin 195,202,203 Urrutia, Juan 66-71

Vanitcharearnthum, Vimut 96n Vegh, Carlos A. 108, 125, 182, 201,

203 Vela, Abraham 180,203 Velasco, Andres [196, 200(n20)], 203 Vickrey, William 49, 59 Volcker, Paul A. 15, 150, 169

Wallace, NeU 2, 23(n1), 27, 88(n1), 90,230,254

Watson, Mark W. 24(n13),27, 122(n2), 126

Weibull, ]örgen W. 208, 210 Weiss, Andrew 191,203 Wicksell, Knut 3,5,9,11, 24(n13), 27,

[29], 73, 90, 172 Wojnilower, Albert M. xv-xvi,

145-69, 170-2 Woodford, Michael xv, 23(n7), 27,74,

78, 83, 89(n3-4), 89, 90, 91, 95, 108, 112, 127

Wright, Randall 56(n4), 58, 122, 125

Yeager, Leland B. 23(n7), 26 Yoshino, ]oe A. 120, 127

Zamagni, Stefano 204,210 Ziebarth, Gerhard 254

Subject Index

agents 174-5, 182, 187, 188, 190, 193-8, 198(nl, 4, 6), 199(nlO, 12), 200(nl6-19), 204-9, 211-13, 240, 251,252;

see also individuals aggregate

activity 2 consumption 200(nI8) demand 145, [167-]168, 178, 190,

195 demand management policies

(Keynesian) 10 general equilibrium

model 123(n13) macroeconomic models 61 output 175, 183, 186, 187 production 175

agriculture 3 algorithms 186, 199(n8), 206, 212 Allais-Baumol-Tobin model 133,134,

135, 137 allocation 35,50, 51, 52, 69, 77, 107,

108, 110, 238 analogical reasoning 206 arbitrage 159, 192 Argentina 12, 146, 178-9, 181-2,

198(nl) 'Arrow securities' 46 Arrow-Debreu general equilibrium

model xv, 34-5, 43, 58, 60, 62, 63,64,65,66

Asian financial crisis (1997-) xiv, 6, 12 asset price theory 73, 77-83, 87,

88-9(n2-4) asset pricing computations 78-80 comment 91, 93 default problem (firms) 80-2, 88,

89(n3) fiscal theory irrelevance

proposition 78 unorthodox failure of the

Modigliani-Miller theorem 82-3, 87-8, 89(n4), 93

asset prices 72, 85, 86, 87, 93, 95(n3), 147,164,178,235

assets 17, 19, 25(n30), 37, 38, 40,46, 49,51, 57(n20), 70, 119, 120, 129, 139, 151, 154, 156, 159, 164, 171, 176, 182, 199(n11), 234-5

financial 88, 191, 194, 196,239, 241, 245

non-diversification 134 austerity 220 Australia 146 Austria 5,237,247-9,251,252 Austrian Schilling 247-8 'Austro-Keynesianism' 248 'Austro-Monetarism' 248

backward induction 67 bad loans 10 baht 7 balance of payments 178, 200(n20) balanced path 105, 109, 114, 116-17 balances 39,41,42,49,51,52,53,54 Bank of England 25(n29) Bank ofjapan 24(n23), 158-9 banking 12, 24(n22), 56(n5), 61, 120,

146,158,179,181,240 bankruptcies 67, 68, 88, 146, 150,

153, 166, 168 banks 37-8,40,41,42,43,51-4,61,

67, 147-50, 152, 154, 155-6, 165, 177-81,200(nI5);

capital requirement (Basie accord, 1988) 153

deposits 120 loans 19 reserves 14,29 see also transaction costs

base money 22, 25(n30), 181, 201 [n20]

Basle accord (1988) 153 Belgian franc 247 Belgium 237 bimetallism 14

259

260 Subject Index

bond stock 91-2 bonds 37, 54-5, 57(n20), 91-2, 94,

132, 135-7, 149, ISO, 158, 159-60, 161, 163, 191

boom-and-bust xvi, ]2,21 bounded ratibnality 204, 206-7 Brady Plan 181 Brazil 146, 181 Bretton Woods 21, 171,242 bubbles 12, 24(n27), 25(n30-1),

95(n3), 153, 156, 159 budget 73, 180,216,219,235 Bundesbank 246 business conditions 147 business cycles 15,56, 173-4,213,

239-40, 241

Canada 9, 146 capacity utilization rates 48 capital 3, 5, 18, 57(n20), 137, 138,

139, 151,153-4,158,161,165, 171,175,176,179,182,184,238, 239,249,250

capital crunch 154-5 capital expenditure 220 capital formation 230 capital inflows 12, 181 capitallevy 111-12 capital markets 16,140,171,235,

238-9, 252 capital stock 187 Caribbean 158 cartels SO cash 39-40,61,96, 110, 112, 114,

11~ 117-18, 119, 122, 134, 158; see also money

cash flow 4, 123(n14), 161, 180, 190, 240

cash management 56(n5), 112, 123(nI2)

cash-in-advance 39,49, 52, 61, 67, 112

central banks xiv, xvi, 1, 38, 48-9, 68-9, 72, 139-40, 145, 151, 154, 161,164,165,168, 168(n2), 170, 181,238,253

see also Bundesbank; Federal Reserve (USA); monetary theory and central banking

Central and Eastern Europe 250 cheque amounts 119, 134, ISS,

164-5 Chicago exchange for options 47 Chicago School 17 Chile 177-8 China 250 CIS (ex-USSR) 171, 243 clearing houses 1 SO Cold War 146 Commission of the European

Communities 33n commodities 34,35,36,39,40,41,

42,44,51,53,54,61,70,145,146 competition 147, 236, 249;

imperfect 35,49, 64, 65, 235 see also markets

competitive equilibria 34, 35, 37, 49, 61

competitiveness 237, 248 constraints

borrowing 81 budget 37, 40-1, 54-5, 85, 91, 92,

95(n2) budget (representative firm) 76, 77,

81,93 cash-in-advance 39, 49, 52, 61, 67 consumer budget 75, 108, 109, 110 fiscal 94 government budget 110 household cash flow 104, 113 intertemporal budget constraint 75,

76 no default 73, 80-1, 83, 85, 89(n4),

93-4 present value 75, 87, 88, 92, 93,

[94-)95 quantity 53, 63 resource 108, 109, 110 transactions 113-14 transversality 73

consumer price index (CP!) 225,227 consumer spending SO consumer utility 114, 116 consumers 57(n8), 73-5, 77, 81, 82,

85, 91, 92-3, 95(n2), 117, 154, 192-3, 212

consumers' surplus 97,98-102, 103, 106, 122(nl-3), 132

consumption xvi, 4,7,8,38,39,54, 56,83,92,103,108,109,112,114, 118, 178, 181-5, 187, 188, 190--3, 195, 196, 199(nI4), 212, 215, 240, 241,242

consumption loan model 191, 199(n10)

consumption-income ratio 113 Continental Illinois Bank 149-50 convertibility 16, 24(n22), 181, 252 convertible systems 14-15

see also gold standard country risk 181, 191 credibility 68, 248, 249, 253 credit xiv-xv, 3, 4, 6, 8, 14, 19-20,

25(n30), 29, 49,139,145,146, 147, 159,166,171,176,181,185,191, 193-4, 200(n16), 242

explosion 148-50 inelastic demand 164 interest elasticity of demand 160--1 international conditions 182,

196-7 perfectly elastic supply and

demand 182 real volume xiv, 22 role in monetary theory xvi standards 167

credit crunches 145, 146, 153, 154-5, 167-8, 171, 190

credit cycles 3,176,190, 199(n9), 204 credit markets 194, 200(nI5) credit rationing 16, 240, 241 creditworthiness 2 currencies 5,8,9, 12, 16, 20--1, 29, 38,

41,94,120,158, 164, 165, 179, 180,231,241,247,250--1,252

current period utility function 104 current-account deficits 178, 179,

180, 185

debt 37, 50, 56(nl), 67, 73-5,86-7, 89(n3), 180--1, 185, 187-9, 190(n11), 190, 196, 199(nI4), 212, 233,238,241,252,253

comment 92, 93 government 111 nominal 111

debt policy 75-7, 80, 82-3, 92

SubjectIndex 261

debt-deflation 6-7 debt-equity mix 78, 82-3, 87-8, 93 default 145, 149, 161, 166-7, 176,

190, 191, 199(n14), 200(nI6) deficits 2, 94 deflation 6, 25(n31), 102, 105, 121,

130,132,133,136,171,221,243 demand xv, 7,233, 235,241,245 demand deposits 164 democracy 242 demographic structure 54 Denmark 247,248 deposit insurance 156, 165 deposits 120, 201 [n20] depressions 6, 10, 16 deregulation 236,238,241 derivatives 151-2, 158 Deutsche Mark (DM) 219,231,247-8,

252,254 devaluation 177-8,179-80, 181, 195 discretion 20,23, 64, 213 disequilibrium 70, 212, 213-14, 216,

233 disinflation 180, 195,216,219,222,

235,237 dividend policy 75-8, 80--7, 92, 93 dividends 38,40,51,52,74,78,

79-80,82-3,85,86,88 domestic agents 174

Econometric Society 97 Economic and Monetary Union

(EMU) xvi, 29, 48 see also euro; European Central Bank

effective demand failure 7, 23(n3) effects

Cantillon 19 credit channel 19-20 externality 185 feedback 25[n27],212 Fisher 18, 138 flexibility preference 198(n4) liquidity 18, 19,28 macroeconomic 198,209 price 17 real balance 13, 73, 82-3, 88 realliquidity 13 relative yield 28 substitution 17

262 Subject Index

effects continued supply side 241 wealth 28, 34, 50, 73, 91, 94,

198(n3) emerging economies 149,236 employment xiv, 1,2, 3, 5, 8, 15,20,

22,56,172,216,240,245,248-9, 252,253

fuH 7, 10, 157,215, 234 endowments 57(n20),60 equilibrium 52,53,54-5,61-2,63,77,

205,206-7,209,211-12,213,234 incomplete markets 35 prices, plans and price

expectations 37 quantity constraints 35

equity 73-5, 155 euro (currency) 21,246, 247, 251-4 EurodoHars 155 European Central Bank 22, [253] European Economic Association 140 European Economic Community

(EEC) 215 'European inflation illusion' 222 European Monetary System

(EMS) 219,221,227-31 European Monetary Union

see Economic and Monetary Union (EMU)

European Union (EU) 72,215-17, 219-27,230-1,233-7,241-3, 246-8,252-3,254; see also 'EI5'

eventtrees 36-7,40,41,43,44,45,48, 60-1, 67

excess capacity 50 exchange controls 16 exchange depreciation 2 exchange rates 6-7,29,72,178,179,

180,181,238,242,245,246,248, 249,253

fixed 16,21,30 pegged 177, 181, 182 real 189, 195 speculation 179

expectations 129, 173-7, 180, 182, 186, 188, 190, 194, 196, 198(n4), 199(n9), 200(nI5), 204, 205, 212

see also rational expectations

export prices 179 exports 179, 181, 231, 250, 253 externalities 183, 189, 198(n6)

Federal Reserve (USA) 146, 150, 151, 152, 154-5, 157, 158, 161, 171-2

fiat money 14,37, 56(n5) financial innovation 22, 29 financial instability xv

see also monetary and financial instability

financial institutions 171 see also business cycles in America

financial intermediaries 200(nI5) financial markets 170-1, 190,238,

239,240,245,251-2 Finland 171 firrns 34,35, 37, 38, 39, 41, 54-5,

82-8,137,170,178,180,234,239, 240,241

default problem 80-2, 88 fiscal financial theory 80,91,92-4 representative 73-6 stock 74-5 theory xv wage-setting, hiring and dismissal

rules 141 fiscal

considerations 107-12, 123(nlO) deficits 233,235 discipline 72 policy 13,29,217,219,220,221,

229,231,234,235,242 transfers 97, 107-8

fiscal theory of money xv, 72-95 comment 91-5 conclusions 87-8 fiscal financial theory and asset price

theory 77-83, 88-9(n2-4) indeterminacy problem 83-7,88 model with representative agents and

firms 73-7 unorthodox financial theory of

firm 72-95 foreign exchange

market 229 reserves 21 risk 158

foreign reserves 180, 181, 195, 200(n20)

France xvi, 221, 228, 230, 237, 239-40,250,253,254

fraud 166-7 'functional finance' 2 futures market 151-2, 159

game theory 35, 60, 208 GDP 123(n14), 133, 135, 136, 159,

167,178,179,180, 181,198(nl-2), 220,222,228,229,230,253

deflator 98, 122(n1), 225-8 growth 232,237 nominal 98 real 98, 121 122(n1)

general equilibrium models 123(n12) general equilibrium rationale 97 German reunification 224 229 231

235,250 '" Germany, Federal Republic of

(1949-) 140,219-32,237,247-9, 251-2

globalization 146,215,236,238,239, 243

gold standard 5,8, 14,20,22, 25(n29), 171

goods 7,50,51,54-5,56, 56(n4), 82, 91,103-4,107,110, 112,123(n11), 129

non-traded 189 single 182-3, 191

government 1,87,91,94, 95(n2), 145, 146, ISS, 165, 179, 229, 233, 236, 238, 241

government securities holdings 153 government solvency 2, 4 government surpluses 13 growth xiv, xvi, 12, 66, 116, 122(n5),

138,139,140,172,174,177,180, 182

see also monetary policy and 'soft' growth

GulfWar(1990-1) 149,153

hedge funds 157-8 high technology 253 homebuilding industry 148

Subject Index 263

households 29,35,37,41,50,73, 74-5,82,83,88,92,103-6,112-13, 119, 134, 135, 137, 141(n2), ISS, 156,161,170,240

housing 149 housing loans 140 hyperinflations 5, 94, 111, 122(n3),

198(n1)

imports 181,235 income 104, lOS, 108, 109, 110, 113,

115,118,179,190-4,197,198(n1), 199(n14)

anticipated 176 capital 123(nlO) consumer 74, 75 flows 174 inequality 235,241 personal 91 real 121, 130 USA 98

indeterminacy problem 72, 73,83-7, 88

individuals 35,37,39 40 41 42 52 53, 54, 183, 184, 185-6, 188, 209;

budget constraints 54-5 infinitely-lived 182 see also agents

industrial capacity utilization 153 inflation xiv-xvi 1 2 5 6 7 14 18

33,43-51, 5/(n16: 20),'68-9,'70,' 94,113,121, 123(nlO), 145-8, 156, 161, 168(n2), 171, 172, 177, 178, 180, 181, 195, 198(nl), 200(nI8), 215,216,218-25,227-32,235, 236-7,240,242,243,246,248-9, 251-4

consumer price 149, 152 endogenously-determined 122(n5) general indirect wage cut 141 low target 22, 24(n27), 25(n31) optimum rate 128, 249 Plaza inflation 150-1 target 21, 24-5(n21, 27) 'unanticipated' 9, 10 welfare cost 114

inflation premium 8, 107 inflation rate 51, 57(n20), 96-7, 112,

122(n3), 128, 130, 249

264 Subject Index

inflation stabilization xvi inflation targeting 45-6 inflation tax 18,20,97, 108, 139, 140,

195 inflation variability 33, 46, 62, 70 inflation and welfare 96-142

basic problem 132-4 comments 128-31, 132-42 condusions 119-22, 123(nI5-16) fiscalconsiderations 107-12, 123(nlO) McCallum-Goodfriend

framework 112-19, 123(nl1-14) money demand and consumers'

surplus 98-102, 122(nl-3) money in production function

137-8, 141(n3) nominality principle 139, 141(n4-5) role of transaction costs 134-6,

141(nl-2) Sidrauski framework 102-7, 108,

112, 122-3(n4-9) taxation of interest income 137 uncertainty 139-40 welfare gains from inflation 140-1 welfare loss (other reasons) 137-40,

141(n3-5) information 62,63,64, 139, 175-6,

191, 199(nI2), 234 innovation 249-50 input-inflation trade-off 55 inputs 160, 189 inside credit 8 inside money 5,7,8,10,13, 14, 15, 16,

19,20, 23(n4), 28-9, 37, 43, 54, 61, 67 definition 13

institutional change 170 institutional investors 151, ISS, 157,

166,252 insurance companies 147-8, 156 interest 29, 37, 38, 49, 67, 91-2, 137 interest accounting 40 interest elasticity 99, 116 interest rates xiv, 2, 8, 19, 33, 38-42,

46,51-4, 56(n2), 61, 63, 97, 101-2, 107, 111,115, 120-1, 148, 151, 162, 171, 181-2, 189-92, 196, 198(n5), 199(n14), 200(nI6)

ceilings 146, 159, 179 elasticity 16

equilibrium 234 falling 193, 200(nI6), 242 high 161,234-5,238-41,250,254 long-term 158-61, 164,225-7,234,

238-9,245-6,254 low 110, 112, 119-22, 134-5, 147,

149,153-4,249,253 market 11, 15, 17 natural 11, 17, 24(nI2), 28 nominal xv, 14, 23(n11), 34, 43-4,

46-7,49, SO, 57(nI6), 62, 70, 72, 96,102,105,107-9,114,117,128, 132,135-8,146,219,245,253-4

optimal 128, 140 overnight 56(n5), 165 policy 47, 107 policy functions 117-18 real xiv-xv, 4, 5, 7, 11, 12-13, 15,

17-18,20,22, 23, 23(n11), 24(nI2-13), 34, 78,94, 105, 108, 132, 133, 13, 140, 149, 216, 218, 219,221,225-9,231-2,234,235, 238,239,241,245-7,249-50,252

reductions 158-9, 168(n2) rising 157,158,161,164,178,193,

200(nI6) short-term 67,68-9,70, ISO, 152-4,

158, 159-61, 164, 172,219, 225-8,231,233,239,242

spending and credit fluctuations model 176, 189

target 21 ten-year Treasury bonds

(1958-96) 160(fig.) 'the' interest rate 16, 17 USA 98-100, 122(nl) variability 107 world 191, 194, 196, 200(nI9)

intertemporal activities 11 budget restraints 1 consumer optimality condition 92 consumption choices 91 co-ordination failures 173 disequilibrium 188 equilibrium 174, 189,213 substitution parameters 107,

123(n8) wealth constraints 95(n2)

intertemporal general equilibrium (IGE) xiv, xv, 2, 4,7-9,13,19,21, 24(n12-13, 24), 28, 31-142

comments 60-5, 66-7l, 91-5, 128-31,132-42

fiscal theory of money 72-95 IGE theory and monetary

policy 33-71 inflation and welfare 96-142 unorthodox financial theory of

firm 72-95 intertemporal general equilibrium

theory and monetary policy 33-71

comments 60-5,66-71 examples 51-5,57(n21) IGE 34-7 money in general equilibrium

37-42, 56(nl-5) nominal indeterminacy and

monetary policy 42-9, 56-7(n6-15)

non-neutrality 49-51,57(n16-20) preview/conclusions 33-4 remark 56

inventory model 39 inverse demand function 100, 141;

see also consumer surplus investment xvi, 5, 6, 7,8, 11, 12, 75,

77, 140, 174, 181, 185, 189, 194, 215,231,234,238,239,240, 241-2,245,250

investment policy 92, 93 investment ratio 179, 216 investors 166-7 Iraq 149, 153 Italy 220, 221(fig.), 228, 229, 230,

237,242,253

Japan 12, 24(n16, 27), 25(n31), 146, 153,156,158-9,161,217,220, 250

inflation (1985-91) 223 monetary authorities ISO savings and loan crisis 168(n1)

Keynesian Cross 11 Kuwait 149, 153

Subject Index 265

labour 7, 35, SO, 54-5, 64, 108, 138, 139,153,218,234-5,240,243,248

labour market 10-11, 12, 19, 23, 225, 233,234,235,236-7,239,241,245

labour supply 110 land 198(n3) Latin America xvi, 2,174,176,

177-82,195,196,250 learning approach 94-5,173-214 leisure 100, 123(nll) lender of last resort xiv, 5, 21, 145,

152, 156, 157, 164, 167, 168 'leverage ratio' standard 154 'leveraged buy-outs' 149 liabilities 76, 77, 78, 93, 94, 199(nl1) liberalization 177, 179, 180 liquidity 8,20, SI, 155, 156, 168 liquidity trap 134-5 loans 154 Luxembourg 247

Maastricht criteria 216 manufacturing 3, 248 market decentralization 35 market economy 141, 17l market share 235 market-clearing 88, 92, 129, 174, 212 markets 1, 37, 46, 56(n3), 80, 104,

129,166,212,233 competitive 61 complete xv, 49, 61, 74 distortions 83 free 165 futures 50 imperfectly competitive 35 incomplete 34, 35, 37, 48, 49, SO,

51,64,65,70,234 perfectly competitive 240

menu costs 57(n12), 64, 129, 130, 139 Mercosur 181 mergers 149, 153 Mexico 12, 146, 180-1 misperceptions 173, 195-6, 200(n 18),

204,212-13 Modigliani-Miller theorem xv, 4, 6, 8,

28, 78 fa Hure 73, 82-3, 87-8, 93

monetarism 8, 24(n22), 29-30 monetarist literature 7,23(n4)

266 Subject Index

monetarist theory 2, 16 'black box' 17, 24(n25) transmission mechanism 16-19,29

monetary activism/intervention 66, 69, 71 aggregates 45, 120 authorities 50, 62, 63, 64, 66, 67,

150 base 21-2, 29 doctrines xiv economics 97 economy 41-2,44 issues 60, 61 neutrality xiv, 34 regimes 12-15, 24(nI9-22), 168(n2) services 120

monetary cycle theory 5 monetary and financial

instability 143-254 business cycles in America 145-69 comments 170-2,204-10,211-14,

245-54 learning about trends 173-214 monetary policy and 'soft'

growth 215-54 spending and credit

fluctuations 173-214 monetary policy 12, 56(n5), 60, 72,

91,97, 103, 107, 122(n5), 146, 149, 152,157,164,170,171

Brunner and Meltzer transmission 17

conclusion 22-3 countercyclical 20, 24-5(n27) credit channel effects 19-20 eariy monetarist-late Keynesian

transmission 17 endogenous 72 exchange rate channel 24(n26) Friedman reformulation 17-18 ineffective transmission 16-17,

24(n23) Iiquidity effects 19 'pushing on astring'

metaphor 24(n23) 'restrictive' 216-21,

227, 229, 230,231,246 transmission mechanisms 15-20,

24(n23-6), 29

see also IGE theory; rational expectations

monetary policy and 'soft' growth 215-54

anatomy of soft growth 233-43 changing balance of powers 238-9 comment 245-54 dynamics of soft growth 239-43 effect of stable monetary

policy 249-50 'Europe as a whole' 252-3 'fundamentals' behind real interest

rate 250 impact of oil counter-shock

(1985-91) 224 increase in rate of inflation (recovery

period, 1985-91) 223 inflation threat (1987-90) 222-7 macroeconomic policies in 'Europe'

(1979-96) 218-33 policy for depreciating the

euro? 251-2 question of political economy

nature 250-1 real interest rates in long run 245-6 recession of 1990s and after 227-33 restrictive but time-consistent policy

mix (1979-87) 218-20 unemployment (1990s) 233-43

monetary theory xvi, 49, 70, 72, 121, 128

transmission channels 49 monetary theory and central

banking 1-30 money 34,51, 56(n4), 61, 64, 66, 67,

91,94,97,111,137,152,160,164, 165-6, 171,247,252

electronic and plastic 49 Friedman's 'restatement' of quantity

theory (1956) 8, 26 general equilibrium 37-42 government monopoly 73 growth rate 117, 120, 122(n3) means of exchange 130 nominal 28 non-interest-bearing 38, 40, 49,

56(n3), 61, 64, 96, 120 opportunity cost 128, 129, 130 optimum quantity xv

purchasing power 130 store of value 130 unit of account 50,51,52, 129, 130,

139 see also cash; fiscal theory of money

moneyaggregate 21 money demand 38, 49, 56(n5),

57(n10), 97, 98-102, 107, 112, 117(fig.), 122(nl-3), 123(n8), 132-5, 137, 138, 141(nl-2), 231, 242

income elasticity 98, 113, 122(n2), 123(n14)

inventory-theoretic analysis 97, 112, 116, 123(nI2)

log-log function 99, 101-2, 121, 122(n3)

sem i-log function 99, 101-2, 121, 122(n3)

two alternative views at low interest rates 136(fig.)

money demand function 97,99-100, 105, 106, 119, 120, 128, 133-5, 141(nl)

money growth rate 111,113 money market 44, 45, 154, 158 money market funds 155-6 money supply 2, 7, 9, 10, 15, 16, 18,

24(n22), 33, 43, 44, 45, 46, 57(nlO), 61, 65, 72, 91-2, 107, 121, 166,234

MI 8, 98, 120, 122(n2), 123(nI5), 164

M2 8, 14, 120, 122(n2), 155, 156, 164, 200(n20)

M3 156 'quantitative guided' policies 78 USA 98, 122(nl)

money-GOP ratio 135 money-income ratio 98-101, 105,

113,116 monitoring costs 199(n 13) monopoly 147 mortgages 149, 154, 158 mutual funds 154, 155-8, 161, 165,

168(n2-3)

NAFTA 180 national income 237,243,247

Subject Index 267

Netherlands 224, 237, 247, 248 neutrality theorems 66, 71 New Zealand 146 no-arbitrage conditions 44, 46 nominal

aggregate demand 7 bonds 123(n8) claims 38, 56(nl) indeterminacy 69 price determination 69 price formation 33, 47-8 'rigidities' 63, 64, 65 'scalar' 21 variables 33

nominality principle 139, 140, 141(n4-5)

non-bank financial intermediaries 170, 172

non-intervention 71 non-monetary general equilibrium

theory 48 non-monotonicity 188 non-price 'rationing' 19 non-tariff barriers 177

OECO (Organisation for Economic Co-operation and Oevelopment) 220, 222, 243

oil 50, 145, 146, 149, 150, 153, 167, 171,180,216-17,219,237,242, 243,250,251

counter-shock (1986-) 222,224,231 oil cartel effectiveness 48 'one-sided growth path rule' 21 OPEC (Organization of Petroleum

Exporting Countries) 171 open economies 173-214 open market operations 9, 107-8 open market purchases 8 optimal contracts 68 options markets 47, 151-2, 159 Organisation for Economic Co-

operation and Oevelopment (OECO) 220, 222, 243

out-of-equilibrium analysis 47 output xiv, 5, 8, 20, 21, 56, 57(nlO),

62,64,78,108,175,177-88,190, 191,194, 198(n6), 199(n8), 200(nI8), 216,222, 224-5, 234

268 Subject Index

output gap 222 outside financing 73-4 'outside' money 5,7,9,10,13-14,15,

16, 18, 19,20, 23(n4), 28-9 overborrowing syndrome 200(n15)

Pareto ranking 51,52,69 payoff coefficients 208-9 pension funds 252 perfect foresight 122(n4), 175, 182,

184, 185, 186, 187, 195-6, 199(n8, 14),200(n18)

perfect knowledge 173 Phillips curve xiv, xv, 9-10, 18, 23,

248 planned economy 171 point projections 198(n4) Ponzi scheme 76, 80 population 35 port folio management 83,91, 119,

129, 130, 134, 137, 147 port folios 77, 87, 132, 161 Portugal 237 price

controls 178, 179 determination 73, 87, 93 effects 17 elasticity 253 formation process 50 rigidities 48, 53, 56(n3), 64 stability 1, 72 systems 77 vector 233

price level xiv, xv, 5, 6, 9, 10, 13, [14-]15,22, 25(n31), 29, 43-4, 45, 47,51, 57(nlO, 20), 62, 67, 68, 69, 72,91,92,94,133,139,140,165, 249

prices 3,7,8,18,37,38,39,42,44,48, 51, 56, 56(n7), 63, 80, 82, 86, 88, 89(n4), 94, 97, 120, 152, 160, 174-5,180,181,204,243,249

false (Hicksian sense) 234 fixed 70 nominal 15 relative 195 stabilization policies 177 stickiness 34, 141

pricing 4, 24(nI2)

private sector 1, 2, 13,20, 22, 24(n22), 25(n30), 28, 108, 111, 155, 165, 179, 242

privatization 177, 180, 181 production 4, 38, 51, 52, 53, 54, 97,

114, 123(n14), 137-8, 183, 184-5, 186,189,190,194,212,235

production plans 35 productivity 56, 107, 121, 175, 184,

185,189,240,248,249 profitability 216 profits 35, 40, 51, 55, 78, 79, 80, 81,

92, 93, 148, 204, 217, 235, 237, 239,240

public debt 50,216 deficits 229,231,233,242 expenditure 11, 13, 179, 229, 233,

236, 241-2 finance 216, 242 sector 179, 241 services 220

purchasing power 54, 246, 252 pure-credit economy (Wicksell) 3, 9,

172

quantity constraints 53 quantity theory 8, 9, 16, 72, 73, 121

Radcliffe Report (1959) 8, 16, 24(n24) 'random walk monetary standard' 13,

20, 24(n19) rate of profit 11 rational expectations 8-9, 18-19,28,

61,63-4,65,68,72,73,77,78,81, 84,87,92,93,94,200(n18-19), 205

see also expectations rationallearning 68 real activity 190 real aggregate demand 12-13 real balances 103-4, 107, 108, 109,

112, 113, 123(n7, nIl), 132, 135-6 real estate 12, 24(n27), 25(n31), 152,

154, 198(n3) real estate investment trusts

(REITs) 149, real income 11 real indeterminacy 69

real money balances 133, 137, 138 recessions 12,15,66,146-7,148,149,

150, 152-4, 156, 159-60, 161, 164, 168(nl), 171, 180, 181, 195,231

regulations: dangers of changes xv rents 76,93 representative agents 61 reputation 68, 166 reserve requirements 9, 23(n6) reserves 5, 15,120,156,160,165, 179,

181 non-interest-bearing 96

retail money-market fund balances 155

Ricardian equivalence 9, 34, 50, 54, 70, 73,

242 intertemporal budget

constraint 25(n30) policy regime 89(n4)

'rigid wages' 2 rigidities 48, 53, 56(n3), 63, 64, 68,

69-70,71,145,212,217,234,235, 237

risk aversion 117, 119 rules 23, 64, 213 rupiah 7 Russia xiv, 242

savings 11, 24(n16), 38, 49, 50, 147, 149, 178, 198(n4), 238, 240, 250, 252

savings and loan association crisis (USA) 152

Scandinavia 146 Schumpeterian opportunities 15 securities 19,21, 150, 154, 158, 159

interest-bearing 119 securities dealers 147-8 seigniorage 29, 80, 108, 110, 122(n3),

165 share holders 38, 43, 51 shocks 60-3,67,107, 121, 146-7, 149,

153, 158, 167, 171, 175-6, 183, 185,196, 200(nI7, 19),204,205, 209,213,216-17,219,227,229, 232,234,237,242,243,250-1

Sidrauski framework 102-7, 108, 112, 122-3(n4-9), 133, 134

Subject Index 269

signal extraction 14, 29 silver 14 smart cards 9 social

deficits 235, 236 expenditure 236,241,242 proteetion 236 welfare 252, 253

'soft' growth see monetary policy and 'soft' growth

South-East Asia 12, 250 Spain 220, 221(fig.), 228,237, 253 speculation 167 spending and credit fluctuations

173-214 brief review of some episodes

177-82, 198(nl-3) comments 204-10,211-14 discussion 176-7,195-8,

200-1 (nI7-20), 204-7 notes on credit fluctuations 176,

189-95, 199-200(n9-16) simple model 174-6, 182-9,

198-9(n4-8) simple model of competition among

economic models 207-9 simulated paths of main

variables 184(fig.) stabilization I, 11, 22, 24(nI5),

25(n29), 56, 94, 177, 180, 194 staggered contracts 57(nI2) standard of living 215 state-contingent policy rule 61, 62,

64,68,69 parametrized state-contingent

monetary rule 67-8 statics 68 steady state 101, 107, 108, 110,

116-17, 175, 184-8, 211, 212, 213 stock markets 24(n27), 25(n31), 74,

75,82,92,150,153,166; Black Monday (19 October

1987) 150-1, 153, 156 crash of 1929 168(n2) Japanese crash (1989) 156 New York 153, 168(n2), 170 warnings 157, 168(n2)

stock prices 74-86, 93, 150, 154, 156, 161

270 Subject Index

structural change 185 deficits 220,227,229-31,243 factors 216, 242-3 reform 241

sunspot models 196 superior knowledge 176 Sweden 12, 171, 237 Swiss franc 252 Switzerland 237

tariffs 177-80, 181 tax havens 158 tax laws 139 taxation xv, 3, 13, 74, 91, 94, 104,

130, 168(n3), 179, 181, 229, 233, 236,241,242,249,254

distortions 110, 138, 140 energy SO high 216 income 97,108,109,110,137,178 indirect 48 interest income 137 rates 112, 220 second-best problems 111 USA 112, 123(nlO) VAT 178,181 see also inflation tax

technological progress 35, S0, 60, 147 thrift institutions 148, ISS time 38,53,54,55,60,61,66,96,98,

104, 112, 116, 119, 120, 123(n12) trade xvi, 15, 177, 180, 185, 187, 195 trade unions 47,48, 145-6, 248 transaction costs 39, 133, 137, 138

role 134-6, 141(nl-2) transaction technology 38,67,68,97,

112, 114, 116 transactions 38,39,49, S0, 53, 54, 61,

64,67,113,116,166 transactions services 98 transitions 174, 175, 185, 189,

198(n4) transmission mechanism

econometric research 50,57(n18), 59

transparency 33, 48-9 transversality conditions 75, 77, 79,

85,86-7,93-4

'trips to bank' 39, 116, 134-5, 138

uncertainty 134, 139-40 unemployment xvi, 1, 12,21,

24(n27), 48, S0, 64, 181-2,216, 217-18,219,220,221-2,225,229, 231,233-43,246,247,248,250, 254

general equilibrium analysis 233-6 mass 215 1990s 233-43 partial equilibrium analysis 236-8

units of account 9, 23(n7), S0, 51, 52, 129, 130, 139

United Kingdom 16, 146, 221(fig.), 228,230,237

United States of America 14, 18,29, 97, 110, 112, 116, 121, 123(n14), 134, 138, 140, 180, 181, 219, 220, 225, 226-7, 231, 234, 236, 237, 250,254

financial developments xv-xvi households 119 inflation (1985-91) 223 interest income 137 monetary authorities 150 money demand (1900-94) 99-100,

107, 122(n2) money supply, income and interest

rates (1900-94) 98 New England 154 real balances (1900-94) 101 taxation 112, 123(nlO) see also business cycles

Uruguay 179-80, 198(n2-3) US dollar 145, 146, 149, 150, 153,

158-9,177,181,219,222,252,254 US Treasury 159-60,243

Vietnam War 242

wage agreements (Taylor-type

staggering) 23(n9) contracts 139 inflexibility 216 rates 146 stickiness 7-8, 10,34, S0, 130, 141

wages 3,8,10-11,64,152,180,217, 218,231,234,237,240,243,249;

'catch up' with changes in money supply 10, 23(n9)

real 110, 234, 238 Walras's Law 72n Walrasian tatonnement process 206 wealth 174,178,183,194, 199(nI4),

209 perceived 182-5, 188, 189, 196,

198(n5)

Subject Index 271

welfare see inflation and welfare welfare gains xv welfare state 241 Western Europe 2 won (currency) 7

yen 153, 158-9, 252