Abstract: Fifty years ago, Alchian and Klein argued that conventional price indices are theoretically incomplete because they measure only the prices of current consumption, while a correct index would also include the prices of future consumption, for which asset prices can serve as a proxy. We update their empirical test with modern methods and properly measured money. Replacing simple-sum aggregates with Divisia monetary aggregates over 1967 to 2019, we decompose each series with the Hamilton filter, estimate short-run money demand from the cyclical components, and model the long run with a vector error correction model. The real S&P 500 index enters short-run money demand positively, significantly so for Divisia M1, but is excluded from the long-run relationship. The evidence supports their argument and suggests conventional price indices may bias short-run monetary policy decisions. 

Abstract: We study why a government might support a privately issued stablecoin that competes with its currency. Existing monetary search models show how government acceptance can sustain circulation, while refusal and punishment can suppress it. We extend this policy comparison by combining public acceptance with reserve and legal-control requirements, a policy we call co-optation. The stablecoin's issuer can accept or reject these requirements. The government weighs the reserve value and legal control of regulated issuance against the currency revenue a ban would restore and the costs of regulation and enforcement. We show that, for a fixed regulatory package, rising enforcement costs can move the implemented policy from a ban to co-optation and then to toleration. In the final case, the government still prefers co-optation, but the issuer declines because toleration permits continued operation without compliance costs. 

Abstract: The 2022 U.S. yield-curve inversion was the deepest in more than four decades, yet the recession many expected had not occurred by January 2025. We examine whether credit and equity conditions help explain why a recession did not follow. During the inversion, credit stress remained low and equity valuations stayed far from their financial-crisis levels. We use a structural Bayesian vector autoregression with traditional and narrative sign restrictions to distinguish policy-expectations shocks from financial-stress shocks. We find a persistent decline in industrial production after a financial-stress shock, but no clear evidence of a persistent decline after a policy-expectations shock or a term-spread shock identified separately from the policy rate. Finally, we construct conditional forecasts in which we hold the observed 2022-2024 paths of the federal funds rate and term spread fixed and replace the credit and equity paths with those from 2008-2010. After three years, forecast industrial production is about 18 percent lower under the crisis paths than under the observed paths. These findings suggest that forecasters should assess credit and equity conditions alongside the yield curve when evaluating recession risk. 

Abstract: Using monthly U.S. data from January 1967 (1967M1) to October 2018 (2018M10), I estimate a structural vector autoregression with short- and long-run restrictions to test whether monetary base expansions had weaker effects on output and prices after the Federal Reserve began paying interest on reserves (IOR) in October 2008. I compare the macroeconomic effects of monetary base shocks across pre-IOR (1967M1–2008M10) and post-IOR (2008M11–2018M10) subsamples. In the pre-IOR period, a one-standard-deviation monetary base shock raises output by approximately 0.31 percent at its peak and produces a permanent increase in the price level of approximately 0.29 percent, with the 68 percent error band on the output response above zero for 57 of the 60 months. In the post-IOR period, the same shock produces muted and statistically imprecise responses for both variables. The variance decompositions show the same change. Monetary policy shocks account for 86.5 percent of monetary base variation on impact in the pre-IOR period against 51.1 percent in the post-IOR period, and money demand shocks account for the difference. These results are consistent with a weakening of the aggregate transmission of monetary base expansions to the real economy.