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Author:Azariadis, Costas 

Working Paper
Capital misallocation and aggregate factor productivity

We propose a sectoral?shift theory of aggregate factor productivity for a class of economies with AK technologies, limited loan enforcement, a constant production possibilities frontier, and finitely many sectors producing the same good. Both the growth rate and total factor productivity in these economies respond to random and persistent endogenous fluctuations in the sectoral distribution of physical capital which, in turn, responds to persistent and reversible exogenous shifts in relative sector productivities. Surplus capital from less productive sectors is lent to more productive ones in ...
Working Papers , Paper 2009-028

Working Paper
Endogenous credit limits with small default costs

We analyze an exchange economy of unsecured credit where borrowers have the option to declare bankruptcy in which case they are temporarily excluded from financial markets. Endogenous credit limits are imposed that are just tight enough to prevent default. Economies with temporary exclusion differ from their permanent exclusion counterparts in two important properties. If households are extremely patient, then the first?best allocation is an equilibrium in the latter economies but not necessarily in the former. In addition, temporary exclusion permits multiple stationary equilibria, with both ...
Working Papers , Paper 2012-048

Working Paper
Private and public circulating liabilities

Changes in the legal and technological environment in the U.S. have created the possibility of private banknote issue, or its electronic equivalent. We wish to understand the implications of this possibility for economic performance. Accordingly, we construct and analyze a dynamic general equilibrium model in which privately-issued liabilities may circulate, either by themselves, or alongside a stock of outside money. In each case we provide results on the existence and multiplicity of equilibria, and we characterize local dynamics in a neighborhood of a steady state. Our results support ...
Working Papers , Paper 2000-012

Working Paper
The optimal inflation target in an economy with limited enforcement

We formulate the central bank's problem of selecting an optimal long-run inflation rate as the choice of a distorting tax by a planner who wishes to maximize discounted utility for a heterogeneous population of infinitely-lived households in an economy with constant aggregate income. Households are divided into cash agents, who store value in currency alone, and credit agents who have access to both currency and loans. The planner's problem is equivalent to choosing inflation and nominal rates consistent with a resource constraint along with an incentive constraint that ensures credit agents ...
Working Papers , Paper 2007-037

Report
Complex eigenvalues and trend-reverting fluctuations

Autoregressions of quarterly or annual aggregate time series provide evidence of trend-reverting output growth and of short-term dynamic adjustment that appears to be governed by complex eigenvalues. This finding is at odds with the predictions of reasonably parameterized, convex one-sector growth models, most of which have positive real characteristic roots. We study a class of one-sector economies, overlapping generations with finite life spans of L greater than or equal to 3, in which aggregate saving depends nontrivially on the distribution of wealth among cohorts. If consumption goods ...
Staff Report , Paper 255

Working Paper
Earnings and wealth inequality and income taxation: quantifying the tradeoffs of switching to a proportional income tax in the U.S.

This paper quantifies the steady-state aggregate, distributional, and mobility effects of switching the U.S. to a proportional income tax system.
Working Papers (Old Series) , Paper 9814

Conference Paper
Discretion, rules and volatility

Proceedings , Volume 78 , Issue May , Pages 65-74

Speech
The optimal inflation target in an economy with limited enforcement

Presented at Indiana University.
Speech , Paper 166

Speech
The optimal inflation target in an economy with limited enforcement

Presented at New Perspectives on Monetary Policy Design. Sponsored by the Bank of Canada and the Centre De Recerca en Economia Internacional. Barcelona, Spain.
Speech , Paper 167

Working Paper
Self-fulfilling credit cycles

This paper argues that self-fulfilling beliefs in credit conditions can generate endoge- nously persistent business cycle dynamics. We develop a tractable dynamic general equi- librium model in which heterogeneous firms face idiosyncratic productivity shocks. Capital from less productive firms is lent to more productive ones in the form of credit secured by collateral and also as unsecured credit based on reputation. A dynamic complemen- tarity between current and future credit constraints permits uncorrelated sunspot shocks to trigger persistent aggregate fluctuations in debt, factor ...
Working Papers , Paper 2012-047

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