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Working Paper
A public finance analysis of multiple reserve requirements
This paper analyzes multiple reserve requirements of the type that have been imposed by a number of developing countries. We show that previous theoretical work on this topic has not succeeded in providing a social welfare rationale for the existence of multiple reserve requirements. We go on to present a model in which it is possible for a multiple reserves regime to improve social welfare relative to simpler regimes involving reserve requirements and/or deposit taxes. We demonstrate the empirical plausibility of our approach by providing a case study of Mexico, a country with extensive ...
Working Paper
The long-run real effects of monetary policy: Keynesian predictions from a neoclassical model
In this paper we integrate Diamond's (1965) model of neoclassical production and capital with Wallace's (1984) model of monetary policy in order to study the real effects of two types of monetary policy actions: open market operations and changes in reserve requirements. We show that a permanent easing of open market or reserve policy can produce permanent increases in both the inflation rate and the level (but not the growth rate) of output. We also describe conditions under which the effects of these policies on real interest rates and output can be large relative to their effects on the ...
Journal Article
Gross state product estimates for Fifth District jurisdictions
Working Paper
A welfare rationale for multiple reserve requirements
Working Paper
Monetary steady states in a low real interest rate economy
We study the properties of an overlapping generations model with many-period-lived agents, neoclassical production and capital accumulation, labor-leisure decisions, population growth, and technological progress. We demonstrate that a plausibly calibrated version of this model has "monetary steady states" -Samuelson-case steady states with large real stocks of unbacked government debt. These steady states can duplicate a number of important features of U.S. postwar data, including three phenomena that challenge other sorts of calibrated models: the low average real interest rate on U.S. ...
Working Paper
Stability of steady states in a model of pleasant monetarist arithmetic
In this paper the authors study the stability properties of the alternative steady-state equilibria that arise in a neoclassical production model that delivers pleasant monetarist arithmetic. They show that if the government?s monetary policy rule involves a fixed money supply growth rate, then ?pleasant arithmetic? steady states?steady states from which a permanent increase in the money growth and inflation rates is associated with a permanent decrease in the real interest rate and a permanent increase in the level of output?are dynamically stable.
Working Paper
Are there optimal multiple reserve requirements?
A number of developing countries have adopted deficit-finance regimes involving multiple reserve requirements. One question the previous literature on this phenomenon has not addressed is whether multiple-reserves regimes can improve on regimes involving single-currency-reserve requirements if the policy settings of the latter regimes are assumed to be chosen optimally. We find that a "conventional" multiple-reserves regime--a regime with positive nominal rates on reservable bonds--cannot Pareto-improve an optimal single-currency-regime but can, in some cases, increase social welfare over ...
Journal Article
Fully funded social security: Now you see it, now you don't?
Governments of countries around the world, including the United States, are considering implementing social security reform programs. In most cases, one of the principal goals of the reform program is to convert a pay-as-you-go social security system into a fully funded system. Most economists believe that the long-run macroeconomic benefits of a successful transition to a fully funded system are likely to be large relative to the benefits from social security reforms of other types. ; The authors of this article describe the basic differences between pay-as-you-go and fully funded systems ...