Monetary Economics

Nominal Government Securities

Actually, progress has been a bit slow on this. Here is the paper as it was in 2003. I wrote it because I basically agreed with Marco Bassetto (Econometrica, 2002) about the fiscal theory of the price level, but thought one could use competitive markets instead of Shubik market games. As in Bassetto's work, the specification of government policy off the equilibrium path is essential. You may also want to check out this paper if you think the price of a share is equal to the present discounted value of dividends per share.

Fisher without Euler

Here is a note based on the above that explains why low nominal interest rates tend to result in low inflation. The difference with the above is that consumers in this economy are simple automatons who do not form complicated beliefs about government policy. Nevertheless, a steady-state version of the Fisher equation relating nominal and real interest rates emerges. This is a two-page summary. And here is a more recent version with a government that issues both nominal discount bonds and nominal perpetuities.