The Mundell-Tobin Effect

This article explains the Mundell-Tobin effect by showing the relationship between the ISLM and ADAS models. The Mundell-Tobin effect states that nominal interest rates may not rise 1:1 with price levels, as the Fisher effect states. The Fisher effect derives from Fisher’s identity of i = r + π where i=nominal interest rates, r = real interest Read more about The Mundell-Tobin Effect[…]

Was OPEC’s price increase inflationary or deflationary?

In the 1970s OPEC, the oil cartel, increased prices which – it is often proclaimed – is responsible for the stagflation in Western countries. Whilst we would naturally expect such an increase in price of a vital commodity to lead to inflation (we will examine these effects shortly), is it possible that there could have Read more about Was OPEC’s price increase inflationary or deflationary?[…]

Yap and the Stone Currency

Yap is an island in the Pacific Ocean within the Caroline Islands with a population of around 10,000. Despite being a tiny country which you have probably never heard of before, Yap teaches us some important lessons on the functions of money. That is because money on the island consists of large stone discs, made Read more about Yap and the Stone Currency[…]