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Gold,
Fiat, and Credit- An Elementary Discussion of Commodity
Money, Fiat Money and Credit: Part 2
- -
Thomas
Quint and Martin Shubik
In
this paper the authors present a series of models, all within
the context of a simple two-good economy, which bring out
the distinctions between the different types of money and
financial institutions. The models emphasize the physical
properties of the economic goods, moneys, and trading systems.
In Part 1 of the paper, the authors covered models in which
the money is a consumable storable; here in Part 2 the authors
consider economies using durable money, fiat money, or credit.
Under this framework the authors are able to successfully
contrast the role of private moneylenders, banks, bilateral
credit systems, and credit clearing houses. The authors
are also able to model the importance of the bankruptcy
or default penalty in supporting the use of fiat.
©
2005 Thomas Quint and Martin Shubik (http://cowles.econ.yale.edu).
All Rights Reserved.
Demand
Shocks and Intertemporal Coordination: A Two Country Model
- - Francesco
Saraceno
The
effect of demand shocks is studied within an economy characterized
by a temporally articulated production structure and bound
by rational agents. Hicks' (1973) model is extended in order
to include trade between two economies with demand links.
This allows to tackle issues as the transmission of shocks
and the coordination of monetary policies. By means of numerical
simulations the author shows that because of irreversibilities,
temporary demand shocks trigger disequilibrium dynamics
with permanent effect on the economy. Market imperfections,
namely a certain degree of wage and price stickiness, prove
necessary to avoid the implosion of the system. An accommodating
monetary policy, by softening financial constraints, is
effective in stabilizing the economy. When considering trading
economies, a certain degree of openness has positive effects,
and independent monetary policies may in some occasions
be desirable.
©
2005 IUP. All Rights Reserved.
Analyzing
Core Inflation in India: A Structural VAR Approach
- - Ashima
Goyal and Ayan Kumar Pujari
Effective
inflation targeting requires careful selection of inflation
target. It is necessary to leave out noisy elements, which
the monetary policy cannot control. However, this exclusion
should not be done in an ad hoc basis. Rather, core inflation
should be determined from the structure of the economy.
This paper estimates core inflation for India, using Structural
Vector Autoregression (SVAR) method. This method is based
on both theory and the structure of the economy. Monthly
data for Wholesale Price Index (WPI) and Index of Industrial
Production (IIP) has been used, covering a long time span
from January 1971 to July 2004. We analyze the impulse responses
of inflation and output, test for several time series properties
of core inflation and carry out a number of Granger causality
tests between headline inflation, core inflation, output
and a monetary aggregate.
©
2005 IUP. All Rights Reserved.
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