Search Results
Working Paper
Innovation and growth with financial, and other, frictions
The generation and implementation of ideas, or knowledge, is crucial for economic performance. We study this process in a model of endogenous growth with frictions. Productivity increases with knowledge, which advances via innovation, and with the exchange of ideas from those who generate them to those best able to implement them (technology transfer). But frictions in this market?including search, bargaining, and commitment problems?impede exchange and thus slow growth. We characterize optimal policies to subsidize research and trade in ideas, given both knowledge and search externalities. ...
Working Paper
Intermediation in Markets for Goods and Markets for Assets
We analyze agents' decisions to act as producers or intermediaries using equilibrium search theory. Extending previous analyses in various ways, we ask when intermediation emerges and study its efficiency. In one version of the framework, meant to resemble retail, middlemen hold goods, which entails (storage) costs; that model always displays uniqueness and simple transition dynamics. In another version, middlemen hold assets, which entails negative costs, that is, positive returns; that model can have multiple equilibria and complicated belief-based dynamics. These results are consistent ...
Working Paper
Diamond-Dybvig and Beyond: On the Instability of Banking
Are financial intermediaries—in particular, banks—inherently unstable or fragile, and if so, why? We address this question theoretically by analyzing whether model economies with financial intermediation are more prone than those without it to multiple, cyclic, or stochastic equilibria. We consider several formalizations: insurance-based banking, models with reputational considerations, those with fixed costs and delegated investment, and those where bank liabilities serve as payment instruments. Importantly for the issue at hand, in each case banking arrangements arise endogenously. ...
Journal Article
Household production and development
The authors introduce home production into the neoclassical growth model and examine its consequences for development economics. They focus on how well differences in policies that distort capital accumulation explain international income differences. In models with home production, such policies not only reduce capital accumulation, they also change the mix of market and nonmarket activity; therefore, for a given policy differential, these models generate larger differences in output than standard models. The authors show that policy differences? welfare implications (hence the welfare ...
Journal Article
The search-theoretic approach to monetary economics: a primer
The authors present simple versions of models used in the search-theoretic approach to monetary economics. They discuss results on the existence of monetary equilibria, the potential for multiple equilibria, and welfare. Using bilateral bargaining theory, they consider models where prices are fixed as well as those where prices are determined endogenously. After describing the frictions necessary to construct a model where money has an essential role, they conclude by reviewing many extensions and applications in the related literature
Discussion Paper
Recent developments in monetary economics: a summary of the 2004 Workshop on Money, Banking, and Payments
We provide a summary and an overview of the papers presented at the Federal Reserve Bank of Clevelands 2004 Workshop on Money, Banking, and Payments, held during the weeks of August 3-7 and August 23-27, 2004.
Discussion Paper
The 2006 Summer Workshop on Money, Banking, and Payments: an overview
This Policy Discussion Paper summarizes the papers presented at the 2006 Summer Workshop on Money, Banking, and Payments. Every summer since 2002, some of the best researchers in the areas of theory, policy, and quantitative analysis relating to money, banking, and payments systems have met in Cleveland to discuss their latest work. The papers presented at the 2006 workshop cover a vast spectrum of issues and use a wide variety of methods. Still, there is an underlying theme, which is an effort to enhance our understanding of monetary economics, broadly defined, and to uncover new ways to ...
Discussion Paper
The 2007 Summer Workshop on Money, Banking and Payments: an overview
The 2007 Summer Workshop on Money, Banking, Payments and Finance met at the Federal Reserve Bank of Cleveland this summer, as we have over the past several years. The following document summarizes and ties together the contributions presented at the workshop this year.
Discussion Paper
The 2005 Summer Workshop on Money, Banking, and Payments: an overview
This PDP summarizes the papers presented at the 2005 Summer Workshop on Money, Banking, and Payments at the Cleveland Fed. Papers covered a wide variety of topics in monetary theory and policy, banking, and payments systems research. Topics ranged from optimal monetary policy, optimal bank contracts, the private supply of money, the coexistence of credit, money, and capital, the design of payment systems, and international currencies. Effort was made to calibrate models and bring them closer to the data. These contributions illustrate the progress made in the field of monetary theory.
Discussion Paper
A conference on liquidity in frictional markets
This Policy Discussion Paper summarizes the papers that were presented at the Liquidity in Frictional Markets conference in November 2008. The papers, which looked at markets for assets as diverse as houses, bank loans, and electronic funds transfer, all explored that amorphous concept called liquidity and how its presenceor absenceaffects the economy.