INFLATION, ASSET PRICES, AND THE TERM STRUCTURE OF INTEREST-RATES IN MONETARY ECONOMIES

This article offers a tractable monetary asset pricing model. In monet ary economies, the price level, inflation asset prices, and the real a nd nominal interest rates have to be determined simultaneously and in relation to each other, This link, allows us to relate In closed form each of the dependent entities to the underlying real and monetary var iables, Among other features of such economies, inflation can be parti ally, nonmonetary and the real and nominal term structures can depend on fundamentally different risk factors, In one extreme, the process f ollowed by the real term structure is independent of that followed by, ifs nominal counterpart.