Search Results
Journal Article
Two perspectives on growth and taxes
Journal Article
Commentary on \\"Monetary policy as equilibrium selection\\"
Working Paper
Irrational expectations and econometric practice: discussion of Orphanides and Williams, \"Inflation scares and forecast-based monetary policy\"
Athanasios Orphanides and John C. Williams' excellent conference paper, "Inflation Scares and Forecast-Based Monetary Policy," contributes importantly to the new and rapidly growing branch of the literature on bounded rationality and learning in macroeconomics. Their paper, like many others, derives interesting and useful theoretical results that show how the introduction of bounded rationality and learning impacts on the effects of monetary policy shocks and the characteristics of optimal monetary policy rules. This note suggests that some additional empirical work-some "irrational ...
Working Paper
Endogenous financial innovation and the demand for money
This paper embeds two key ideas about the nature of financial innovation taken from the empirical literature into a familiar equilibrium monetary model. It provides formal support for several alternative econometric specifications for money demand that attempt to capture the effects of financial innovation and demonstrates that a popular theoretical model of money demand, when suitably modified, can account for some unusual monetary dynamics found in the data. Thus, it helps to establish both the theoretical relevance of recent empirical work and the empirical relevance of recent theoretical ...
Working Paper
Stopping inflations, big and small
Previous studies of disinflation work with models in which firms use time-dependent strategies, changing nominal prices at intervals of fixed length. These models may be criticized for failing to allow pricing behavior to adjust after a large shift in policy regime. Consequently, this paper develops a model that allows firms to adopt strategies that are partially state-dependent, changing nominal prices whenever they deviate sufficiently from their target values. The paper uses this model to examine how the welfare costs and benefits of disinflation vary with the initial inflation rate and ...
Journal Article
Price stability under long-run monetary targeting
Journal Article
Forecasting the effects of reduced defense spending
Forecasts from a vector autoregressive model indicate that the substantial cuts in defense spending proposed by the Bush Administration in 1991 are likely to reduce GNP in both the short run and the long run. These forecasts hold even if proceeds from the spending cuts are used to reduce the federal debt. The long-range VAR forecasts, in particular, contrast markedly with those of the large-scale econometric models employed by the Congressional Budget Office.
Journal Article
Financial evolution and the long-run behavior of velocity : new evidence from U.S. regional data
Innovations in the private financial sector influence the income velocity of money in an economy over the entire course of its development. In the early stages of growth, increased monetization, as manifested by the spread of the banking system, causes velocity to fall. Later, the emergence of nonbank financial intermediaries causes velocity to rise. Evidence of these patterns is found in regional demand deposit data from the United States.
Working Paper
Money and the gain from enduring relationships in the turnpike model
This paper presents a stochastic version of Townsend's turnpike model in which the aggregate endowment is distributed randomly between two sets of agents and in which agents of each type are allowed to remain at a trading post for multiple periods. Agents use money as a means of exchange when they meet as strangers but use private securities when they remain paired at the same trading post. Both welfare and the income velocity of money increase monotonically with the length of the trading session.
Working Paper
The monetary transmission mechanism
The monetary transmission mechanism describes how policy-induced changes in the nominal money stock or the short-term nominal interest rate impact real variables such as aggregate output and employment. Specific channels of monetary transmission operate through the effects that monetary policy has on interest rates, exchange rates, equity and real estate prices, bank lending, and firm balance sheets. Recent research on the transmission mechanism seeks to understand how these channels work in the context of dynamic, stochastic, general equilibrium models.