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Working Paper
Implications of economic interdependence and exchange rate policy on endogenous wage indexation decisions
This paper shows how economic interdependence affects wage indexation decisions when monetary authorities do not observe stochastic disturbances. Under a managed exchange rate, atomistic wage setters in interdependent nations will choose the same degree of indexation as they would in a small open economy. Under a flexible exchange rate, the likelihood rises that they will choose a lower degree of indexation than their counterparts in a small open economy as the degree of interdependence rises, as the variance of money demand shocks rise relative to supply shocks, and as supply curves steepen. ...
Working Paper
Borrowed reserves targeting and nominal income smoothing
Working Paper
Wage indexation in a multisector economy
Working Paper
Loan commitments and optimal monetary policy
Working Paper
Goods-market competition and profit sharing: a multisector macro approach
This paper develops a theoretical model that relates the degree of goods-market competition with the extent of profit sharing. The authors multisector framework indicates that increased competition in goods markets leads to an increased weighting on firm profits in an optimally indexed contract. Consequently, our model predicts that a rising extent of profit-sharing arrangements in actual U.S. contracts should accompany an increase in the degree of goods-market competition. Available, but limited, data on profit sharing in the United States is generally consistent with this fundamental ...
Working Paper
Bank balance sheet dynamics under a regulatory liquidity-coverage-ratio constraint
This paper presents a dynamic model of a bank?s optimal choices of imposing a binding liquidity-coverage-ratio (LCR) constraint. Our baseline balance-sheet dynamics starts with portfolio separation and no LCR constraint. Under a scenario in which regulators prohibit banks from applying securities to fulf ll the LCR constraint, portfolio separation continues to hold, but deposit holdings depend on the extent to which the LCR constraint is binding. When banks are allowed to apply securities toward satisfying the constraint, portfolio separation can break down and lead to ambiguous effects on ...