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Working Paper
The European unemployment dilemma
Working Paper
\"Dollarization,\" seignorage, and the demand for money
Working Paper
The evolution of small change
Western Europe was plagued with currency shortages from the 14th to the 19th century, at which time a `standard formula' had been devised to cure the problem. We document the evolution of mon- etary theory, policy experiments and minting tech- nology over the course of six hundred years. In a companion paper, we use a cash-in-advance model of commodity money to provide an analytical frame- work for the problem of small change.
Working Paper
Managing expectations and fiscal policy
This paper studies an optimal fiscal policy problem of Lucas and Stokey (1983) but in a situation in which the representative agent's distrust of the probability model for government expenditures puts model uncertainty premia into history-contingent prices. This situation gives rise to a motive for expectation management that is absent within rational expectations and a novel incentive for the planner to smooth the shadow value of the agent's subjective beliefs to manipulate the equilibrium price of government debt. Unlike the Lucas and Stokey (1983) model, the optimal allocation, tax rate, ...
Working Paper
Impacts of priors on convergence and escapes from Nash inflation
Recent papers have analyzed how adaptive agents may converge to and escape from self-confirming equilibria. All of these papers have imputed to agents a particular prior about drifting coefficients. In the context of a model of monetary policy, this paper analyzes dynamics that govern both convergence and escape under a more general class of priors for the government. The authors characterize how the shape of the prior influences the dynamics in important ways. There are priors for which the E-stability condition is not enough to assure local convergence to a self-confirming equilibrium. ...
Journal Article
A supply-side explanation of European unemployment
This article offers a supply-side explanation of striking patterns in unemployment rates and duration of unemployment in European countries, compared with other member countries of the OECD (Organization for Economic Cooperation and Development). The rise in long-term unemployment in Europe is attributed to the adverse incentive effects of generous welfare programs in times of economic turbulence.
Working Paper
The big problem of small change
Western Europe was plagued with currency shortages from the 14th century, at which a 'standard formula' had been devised to cure the problem. We use a cash-in-advance model of commodity money to define a currency shortage, show that they could develop and persist under commodity money regime, and analyze the role played by each ingredient in the standard formula. A companion paper documents the evolution of monetary theory, monetary experiments and minting technology over the course of six hundred years.
Working Paper
Government debt and taxes