A nominal theory of the nominal rate of interest and the price level with the integration of both the asher effect and the gibson paradox

Abstract

SurmlrioEste trabalho desenvolve uma teoria simples de determinac;:ao de renda e juros nomina is sob tres pressupostos principais. Em primeiro lugar, a unica distin�o relevante entre a rnoeda e titulos do governo reside nos prazos de retenc;:ap. Segundo, as indivfduos levam em conta a restriyao do on;:amento publico, nao se preocupando em descontar futuras obrigac;:5es fiscais aS$).Ciadas a emissao de titulos do governo. Finalmente, 0 modelo incornora urn mercado de enid ito privado para emprestimos e tom ada de emprestimos para e pelos indivfduos. De acordo com esta teoria, a ta'xa nominal de juros e determinada por dais fatores distintos: a relac;:ao titulo/maeda, e a taxa de expansao da base monetaria.A prime ira destas influencias pode gerar uma correlat;:ao positiva entre taxas nominais de juros e n(veis de pret;:os; a segunda pode levar a uma relac;:ao Intima entre 0 nlvel destas taxas nominais e as taxas de expansao do n(vel de prec;:os. Portanto, esta teoria aplica-se, de manei ra coerente, tanto ao Paradoxo Gibson como ao efeito Fisher. AbstractThis paper develops a simple theory of nominal j ' ncome interest determination under .three key assumptions: firstly, the only relevant distinction between money and government bonds. lies in their holding periods. Secondly, individuals take full account of the government budget cOl")straint and do not concern themselves with di scounting future tax liabilities associated with the issue of govern ment bonds. Finally, the model incorporates a private credit market for individuals' borrowings and lendings. According to this theory, the nominal rate of interest is determined by two separable influences, * A previous version of this paper was presented at the 7 t h Latin American Meeting of the Econometr;1c Society, Sao Paulo, August 4/7. 1987. * .. Senado Federal. R. de EconometriaRio de Janeiro v. VIII, n. 1, p. 7-20 jan./jun. 1988 the bond/money ratio and the rate of expansion of the money supply.The first of these influences can give rise to a positive correlation between nominal interest rates and price levels and the second can generate a close relationship between the level of these nominal rate and the rates of expansion of the price level. Therefore, this theory coherently accounts for both the Gibson Paradox and the Fisher· ·effect.