We develop a theory of money and credit as competing payment instruments, then put it to work in applications. Buyers can use cash or credit, with the former (latter) subject to the inflation tax (transaction costs). Frictions making the choice of payment method interesting also imply equilibrium price dispersion, and together these deliver closed-form solutions for money demand. The model can ...

In this paper the long-run trend in CPI inflation (core inflation) for the US over the 1960– 2000 period is estimated using a common trends model. In this framework, core inflation is interpreted and constructed as the long-run forecast of inflation conditional on the information contained in nominal money growth, output fluctuations and movements in the oil price. Unlike other commonly used me...

A propitiously timed household survey carried out in Mozambique over the period 2008/2009 permits us to study the relationship between shifts in food prices and child nutrition status in a low income setting. We focus on weight-for-height and weight-for-age in different survey quarters characterized by very different food price inflation rates. Using propensity score matching techniques, we fin...

This paper examines alternative statistically-based measures of core inflation in Ireland over the period 1976-1999. A highly disaggregated (approximately 500 price series) dataset from the Irish HICP is used. The distribution of quarterly price changes is shown, in common with other international studies, to be highly kurtotic (i.e., fat-tailed) and right skewed. This would suggest there is co...

This paper assesses the time series properties of the ASA-NBER forecasts for several US macroeconomic variables. Specifically, we examine whether forecasts exhibit a weak form of rationality which fulfills the following conditions: (i) are the actual and forecast series integrated of the same order; (ii) are they cointegrated, and; (iii) is the cointegrating vector consistent with long run unit...

A general-equilibrium shopping-time model ofmoney demand is used to obtain estimates ofsome dynamic costs ofinflation under alternative monetary policy rules. After examining the welfare implications ofsteady-state inflation, dynamic welfare costs are evaluated for inflation-targeting and price-level targeting regimes in a stochastic setting in which agents are uncertain about the underlying in...

The canonical inflation specification in sticky-price rational expectations models (the new-Keynesian Phillips curve) is often criticized on the grounds that it fails to account for the dependence of inflation on its own lags. In response, many recent studies have employed a “hybrid” sticky-price specification in which inflation depends on a weighted average of lagged and expected future values...

The first exercise uses a different approach to impute missing values within price series. The method used in the paper is to fill missing prices with the last available price for each product. This approach is reasonable because the gaps in the online data last only a few days. However, official statistical offices deal with missing values in their monthly series in different ways. The standar...

F or gauging inflationary pressures, many policymakers and financial market analysts pay close attention to the behavior of wages. It is widely believed that if wage costs rise faster than productivity, the price level may rise as firms pass forward increased wage costs in the form of higher product prices. Hence changes in productivity-adjusted wages1 are believed to be a leading indicator of ...

economy is operating in the region of price stability, public expectations and beliefs about the central bank’s plans and objectives, always important, become even more so. First, because the public can no longer safely assume that the central bank prefers lower to higher inflation, expectations about future policy actions and future inflation may become highly sensitive to what the public perc...