This paper offers a methodological contribution to monetary theory. First, it presents a model economy with cash-in-advance constraints, following the work of Lucas in the early 80’s; then, it specializes the model to preferences and shocks assumed in the Lagos and Wright (2005) framework....

This paper provides the most fully comprehensive evidence to date on whether or not monetary aggregates are valuable for forecasting US inflation in the early to mid 2000s. We explore a wide range of different definitions of money, including different methods of aggregation and different...

This Economic Letter compares the historical predictive value of monetary aggregates in forecasting inflation in the United States and in the euro area.

Monetary theory and policy have been revolutionized in the two decades since October 1979, when the Federal Reserve under the leadership of Paul Volcker moved to stabilize inflation and bring it down. On the side of practice, the decisive factor was the demonstration that monetary policy could...