Date of Award


Degree Type


Degree Name

Doctor of Philosophy


The thesis analyses the equilibrium of a cash-in-advance economy with endogenous production. In this framework, inflation is a tax on trade, raising the price of goods purchased relative to those supplied. The thesis investigates three aspects of the disruptive effects of this inflation tax on the allocation of resources.;The first essay analyses the effects of anticipated inflation on stock market prices in stationary equilibrium. The essay demonstrates that a permanent rise in the anticipated rate of inflation has a depressing effect on the stock market. There are two reasons for this result. Firstly, the real value of a given stream of dividends is reduced when inflation rises because the inflation rate is shown to be a specific tax on dividends. Secondly, the firms' profits are lowered, because the inflation rate distorts adversely the equilibrium level of employment.;The second essay investigates the effects of perfectly foreseen monetary policies on the time paths of output, prices, interest rates--real and nominal--and stock market prices. Anticipated monetary policies are shown to have real effects by distorting the labour-leisure choices of agents. The essay demonstrates that the adjustment path of the economy, between the announcement and the implementation of the new policy, depends critically on the elasticity of marginal utility of consumption. Furthermore, it is shown that along the adjustment path, the real rate of interest is negatively correlated with the anticipated rate of inflation.;The third essay of the thesis investigates the uniqueness of a monetary equilibrium in models that motivate money through a cash-in-advance constraint. It is demonstrated that under standard conditions on preferences and technology, Clower-type models can have an infinite number of equilibrium paths with self-fulfilling expectations. These equilibria are seen to lead asymptotically to either a collapse of the monetary economy or the accumulation of an infinite level of real balances. A condition on the representative agent's utility function is specified that permits to rule out explosive price level paths. This condition is shown to be formally identical to the one imposed in other monetary models.



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