Asset returns and inflation in a cash-in-advance economy

Article Abstract:

The Fisherian view of the world implies that the real rates of return on any asset are independent of inflation. However, recent studies have resulted in empirical evidence inconsistent with this economic theory. To resolve the issue of the relationship between asset returns and inflation, a general equilbrium model is used with money being introduced by imposing a cash-in-advance (CIA) constraint. Inflation generated by real impulses results is shown to have a strictly negative covariance with real equity returns. On the other hand, inflation generated by monetary impulses shows a zero covariance with real equity returns.

Return on investment, Equilibrium (Economics), Rate of return

---

Capital mobility and anticipated inflation with cash-in-advance constraints

Article Abstract:

The impact of inflation on terms of trade and physical capital movement is analyzed using a two-country, two-good model with cash-in-advance constraints. The domestic rate of inflation is indicated to varyinversely with the terms of trade and the exchange rate. The magnitude of the elasticity of the demand for capital with respect to terms of trade and the domestic rate of inflation is also shown to determine the source of capital movement and the optimal domestic capital held by the domestic country.

Capital movements

---

Incomplete information, stabilization, and the relationship between inflation and unemployment

Article Abstract:

Monetary stabilization policies and the presence of persistent umemployment are correlated in a macroeconomic model. Under situations of perfect information and an active monetary policy, inflation arises and unemployment gets reduced causing lower real wages. With incomplete information, unemployment increases but inflation goes down. Government policy will therefore have to weigh the trade-offs: lower inflation or increased employment.

Monetary policy

Similar abstracts:

• Abstracts: Chaotic dynamics in a cash-in-advance economy. Testing for sunspot equilibria in the German hyperinflation. On information and market dynamics: The case of the U.S. beef market
• Abstracts: Agent-based computational transaction cost economics. Equilibria, stability and asymptotic dominance in a speculative market with heterogeneous traders
• Abstracts: Monte Carlo evidence on cointegration and causation. Human capital spillovers within the workplace: evidence for Great Britain
• Abstracts: Horizontal mergers and the balance of trade. Vertical mergers and the balance of trade. Is economic efficiency the driving force behind mergers?
• Abstracts: The non-neutrality of money and the optimal monetary growth rule when preferences are recursive: cash-in-advance vs. money in the utility function

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.