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Money Growth Rules and Price Level Determinacy

  • Charles T. Carlstrom

    (Federal Reserve Bank of Cleveland)

  • Timothy S. Fuerst

    (Bowling Green State University)

Do exogenous money growth rules produce price level determinacy? This is a classic topic in monetary theory. This paper contributes to this literature by examining the effect of money demand timing. The paper demonstrates how conditions for determinacy vary depneding upon whether the theoretical model uses 'cash-in-advance' timing or 'cash-when-I'm-done' timing. This issue is addressed in an endowment economy and a standard production economy. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(03)00010-3
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 2 (April)
Pages: 263-275

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Handle: RePEc:red:issued:v:6:y:2003:i:2:p:263-275
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  1. Benhabib, Jess & Schmitt-Grohé, Stephanie & Uribe, Martín, 1999. "Monetary Policy and Multiple Equilibria," CEPR Discussion Papers 2316, C.E.P.R. Discussion Papers.
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  3. Maurice Obstfeld & Kenneth Rogoff, 1981. "Speculative hyperinflations in a maximizing models: can we rule them out?," International Finance Discussion Papers 195, Board of Governors of the Federal Reserve System (U.S.).
  4. Calvo, Guillermo A, 1979. "On Models of Money and Perfect Foresight," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(1), pages 83-103, February.
  5. Roger E. A. Farmer, 1999. "Macroeconomics of Self-fulfilling Prophecies, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062038, June.
  6. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
  7. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer, vol. 4(3), pages 345-80.
  8. Robert E. Lucas Jr. & Nancy L. Stokey, 1984. "Money and Interest in Cash-In-Advance Economy," Discussion Papers 628, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Thomas F. Cooley & Gary D. Hansen, 1987. "The Inflation Tax in a Real Business Cycle Model," UCLA Economics Working Papers 496, UCLA Department of Economics.
  10. Matsuyama, Kiminori, 1991. "Endogenous Price Fluctuations in an Optimizing Model of a Monetary Economy," Econometrica, Econometric Society, vol. 59(6), pages 1617-31, November.
  11. Charles T. Carlstrom & Timothy S. Fuerst, 2001. "Timing and real indeterminacy in monetary models," Working Paper 9910R, Federal Reserve Bank of Cleveland.
  12. Michener, Ronald & Ravikumar, B., 1998. "Chaotic dynamics in a cash-in-advance economy," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1117-1137, May.
  13. Charles T. Carlstrom & Timothy S. Fuerst, 2000. "Forward-looking versus backward-looking Taylor rules," Working Paper 0009, Federal Reserve Bank of Cleveland.
  14. Charles T. Carlstrom & Timothy S. Fuerst, 2001. "Real indeterminacy in monetary models with nominal interest rate distortions: the problem with inflation targets," Working Paper 9818R, Federal Reserve Bank of Cleveland.
  15. Matsuyama, Kiminori, 1990. "Sunspot equilibria (rational bubbles) in a model of money-in-the-utility-function," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 137-144, January.
  16. Svensson, Lars E O, 1985. "Money and Asset Prices in a Cash-in-Advance Economy," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 919-44, October.
  17. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
  18. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, vol. 25(3), pages 380-396, December.
  19. Fukuda, Shin-ichi, 1993. "The emergence of equilibrium cycles in a monetary economy with a separable utility function," Journal of Monetary Economics, Elsevier, vol. 32(2), pages 321-334, November.
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