We adopt mechanism design to study the long-run consequences of inflation on aggregate output, trade, and welfare. Our theory captures multiple channels for individuals to respond to the inflation tax: search intensity (the intensive margin), market participation (the extensive margin), and substitution between money and a higher return asset. To determine the terms of trade in pairwise meeting...

This paper surveys the persian monetary crises due to economic sanctions and speculative attacks that leads to high inflation. Economic sanctions are associated with various forms of trade barriers and restriction on financial transactions. Among the most influential sanctions on Iran's oil export and central bank sanctions are noted that their Aims to reduce Iran's oil revenues and Devaluation...

The central banks of New Zealand, Canada, and the United Kingdom have recently decided to make price stability the overriding goal of monetary policy. Similar proposals in the United States have received a lukewarm reception. Although some opponents have argued that moderate inflation is beneficial, many concede its effect on economic welfare is detrimental.1 Instead, they argue that a price st...

The application of the generalized gravity model in analyzing the Bangladesh’s trade reveals that Bangladesh’s trade is positively determined by the size of the economies, per capita GNP differential of the countries involved and openness of the trading countries. Bangladesh’s exports are positively determined by the exchange rate, partner countries’ total import demand and openness of the Bang...

This paper analyzes the potential effect of global market competition on inflation dynamics. It does so through the lens of the Calvo model of staggered price setting, which implies that inflation depends on expected future inflation and a measure of marginal costs. I modify the assumption of a constant elasticity of demand, standard in this model, to provide a channel through which an increase...

A general equilibrium model of a small open economy is developed to analyze the optimal rate of inflation under discretion. Once agents’ welfare is the sole policy objective it is possible to show that openness and inflation no longer have a simple inverse relationship. A greater degree of openness may lead the policy maker to want to exploit the short-run Phillips curve more aggressively, even...