Search Results
Working Paper
Learning and shifts in long-run productivity growth
Shifts in the long-run rate of productivity growth--such as those experienced by the U.S. economy in the 1970s and 1990s--are difficult, in real time, to distinguish from transitory fluctuations. In this paper, we analyze the evolution of forecasts of long-run productivity growth during the 1970s and 1990s and examine in the context of a dynamic general equilibrium model the consequences of gradual real-time learning on the responses to shifts in the long-run productivity growth rate. We find that a simple updating rule based on an estimated Kalman filter model using real-time data describes ...
Working Paper
Welfare-maximizing monetary policy under parameter uncertainty
This paper examines welfare-maximizing monetary policy in an estimated micro-founded general equilibrium model of the U.S. economy where the policymaker faces uncertainty about model parameters. Uncertainty about parameters describing preferences and technology implies not only uncertainty about the dynamics of the economy. It also implies uncertainty about the model's utility-based welfare criterion and about the economy's natural rate measures of interest and output. We analyze the characteristics and performance of alternative monetary policy rules given the estimated uncertainty regarding ...
Working Paper
Financial Stability Committees and Basel III Macroprudential Capital Buffers
We evaluate how a country’s governance structure for macroprudential policy affects its implementation of Basel III macroprudential capital buffers. We find that the probabilities of using the countercyclical capital buffer (CCyB) are higher in countries that have financial stability committees (FSCs) with stronger governance mechanisms and fewer agencies, which reduces coordination problems. These higher probabilities are more sensitive to credit growth, consistent with the CCyB being used to mitigate systemic risk. A country’s probability of using the CCyB is even higher when the FSC ...
Working Paper
Temporary partial expensing in a general-equilibrium model
This paper uses a dynamic general-equilibrium model with a nominal tax system to consider the effects of temporary partial expensing allowances on investment and other macroeconomic aggregates.
Working Paper
New Financial Stability Governance Structures and Central Banks
We evaluate the institutional frameworks developed to implement time-varying macroprudential policies in 58 countries. We focus on new financial stability committees (FSCs) that have grown dramatically in number since the global financial crisis, and their interaction with central banks, and infer countries? revealed preferences for effectiveness versus political economy considerations. Using cluster analysis, we find that only one-quarter of FSCs have both good processes and good tools to implement macroprudential actions, and that instead most FSCs have been designed to improve ...
Working Paper
Documentation of the Research and Statistics Division’s estimated DSGE model of the U.S. economy: 2006 version
This paper provides documentation for the large-scale estimated DSGE model of the U.S. economy used in Edge, Kiley, and Laforte (2007). The model represents part of an ongoing research project (the Federal Reserve Board's Estimated, Dynamic, Optimization-based--FRB/EDO--model project) in the Macroeconomic and Quantitative Studies section of the Federal Reserve Board aimed at developing a DSGE model that can be used to address practical policy questions and the model documented here is the version that was current at the end of 2006. The paper discusses the model's specification, estimated ...
Working Paper
The unreliability of credit-to-GDP ratio gaps in real-time: Implications for countercyclical capital buffers
Macroeconomists have long recognized that activity-gap measures are unreliable in real time and that this can present serious difficulties for stabilization policy. This paper investigates whether the credit-to-GDP ratio gap, which has been proposed as a reference point for accumulating countercyclical capital buffers, is subject to similar problems. We find that ex-post revisions to the U.S. credit-to-GDP ratio gap are sizable and as large as the gap itself, and that the main source of these revisions stems from the unreliability of end-of-sample estimates of the series' trend rather than ...
Working Paper
The responses of wages and prices to technology shocks
This paper reexamines wage and price dynamics in response to permanent shocks to productivity. We estimate a micro-founded dynamic general equilibrium (DGE) model of the U.S. economy with sticky wages and sticky prices using impulse responses to technology and monetary policy shocks. We utilize a flexible specification for wage- and price-setting that allows for the sluggish adjustment of both the levels of these variables as in standard contracting models as well as intrinsic inertia in wage and price inflation. On the price front, we find that in our VAR inflation jumps in response to an ...
