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Author:Azariadis, Costas 

Working Paper
Self-Fulfilling Credit Cycles

In U.S. data 1981?2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is acyclical; similarly, shocks to unsecured firm credit explain a far larger fraction of output fluctuations than shocks to secured credit. In this paper we develop a tractable dynamic general equilibrium model in which unsecured firm credit arises from self-enforcing borrowing constraints, preventing an efficient capital allocation among heterogeneous firms. Unsecured credit rests on the value that borrowers attach to a good credit reputation which is a forward-looking ...
Working Papers , Paper 2015-5

Conference Paper
Discretion, rules and volatility

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

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, and a constant production possibilities frontier. Both the growth rate and TFP respond to random and persistent endogenous fluctuations in the sectoral distribution of physical capital which, in turn, responds to reversible exogenous shifts in relative sector productivities. Surplus capital from less productive sectors is lent to more productive ones in the form of secured collateral loans, as in Kiyotaki?Moore (1997), and also as unsecured reputational ...
Working Papers , Paper 2012-046

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
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

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 stationary utility for a heterogeneous population of infinitely-lived households in an economy with constant aggregate income and public information. Households are segmented 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 interest rates consistent with a resource constraint, and with an ...
Working Papers , Paper 2012-044

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
Trend-reverting fluctuations in the life-cycle model

Aggregate time series provide evidence of short term dynamic adjustment that appears to be governed by complex or negative real eigenvalues. This finding is at odds with the predictions of reasonably parameterized, convex one-sector growth models with complete markets. We study life cycle economies in which aggregate saving depends non-trivially on the distribution of wealth among cohorts. If consumption goods are weak gross substitutes near the steady state price vector, we prove that the unique equilibrium of a life cycle exchange economy converges to the unique non-monetary steady state ...
Working Papers , Paper 1998-015

Working Paper
Incomplete Credit Markets and Monetary Policy

We study monetary policy when private credit markets are incomplete. The macroeconomy we study has a large private credit market, in which participant households use non-state contingent nominal contracts (NSCNC). A second, small group of households only uses cash, supplied by the monetary authority, and cannot participate in the credit market. There is an aggregate shock. We find that, despite the substantial heterogeneity, the monetary authority can provide for optimal risk-sharing in the private credit market and thus overcome the NSCNC friction via a counter-cyclical price level rule. The ...
Working Papers , Paper 2015-10

Working Paper
A two-sector model of endogenous growth with leisure externalities

This paper considers the impact of leisure preference and leisure externalities on growth and labor supply in a Lucas [12] type model, as in Gmez [7], with a separable non-homothetic utility and the assumption that physical and human capital are both necessary inputs in both the goods and the education sectors. In spite of the non-concavities due to the leisure externality, the balanced growth path is always unique, which guarantees global stability for comparative-static exercises. We find that small differences in preferences toward leisure or in leisure externalities can generate ...
Working Papers , Paper 2012-045

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