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Working Paper
The Tradeoffs in Leaning Against the Wind
Credit booms sometimes lead to financial crises which are accompanied with severe and persistent economic slumps. Does this imply that monetary policy should ?lean against the wind? and counteract excess credit growth, even at the cost of higher output and inflation volatility? We study this issue quantitatively in a standard small New Keynesian dynamic stochastic general equilibrium model which includes a risk of financial crisis that depends on ?excess credit?. We compare monetary policy rules that respond to the output gap with rules that respond to excess credit. We find that leaning ...
Working Paper
Why Do Firms Pay Different Interest Rates on Their Bank Loans?
We document significant variation in interest rates among similar commercial and industrial loans using confidential supervisory data on the largest US banks. This dispersion does not appear to be due to risk. We rationalize the data using a search cost model and find that search costs are highest for smaller and riskier borrowers and lower for public firms, consistent with predictable differences in the costs of screening and monitoring. We find that search costs are substantial. Over a third of firms behave as if they do not comparison shop; half of all firms appear to only obtain two ...
Conference Paper
The financial crisis and global policy reforms - commentary
Conference Paper
Comments on 'The ins and outs of LSAPs'.
Working Paper
A weekly perfect foresight model of the nonborrowed reserve operating procedure
Of the many studies analyzing the Federal Reserve's post-October 6, 1979 nonborrowed reserve (NBR) operating procedure, none has focused upon weekly money market dynamics under rational expectations. This paper employs the rational expectations assumption in an explicit institutional model of the NBR procedure. The paper is positive rather than normative, isolating the policy elements that comprise the procedure and investigating their dynamic interaction.
Working Paper
Interactions between the seasonal and business cycles in production and inventories
This paper shows that in several U.S. manufacturing industries, the seasonal variability of production and inventories varies with the state of the business cycle. We present a simple model which implies that if firms reduce the seasonal variability of their production as the economy strengthens, and they either hold constant or increase the stock of inventories they bring into the high-production seasons of the year, then they must face upward-sloping and convex marginal production cost curves. We conclude that firms in a number of industries face upward-sloping and convex ...
Working Paper
Sticky prices: new evidence from retail catalogs