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Author:Hornstein, Andreas 

Working Paper
On the implementation of Markov-Perfect interest rate and money supply rules : global and local uniqueness

Currently there is a growing literature exploring the features of optimal monetary policy in New Keynesian models under both commitment and discretion. This literature usually solves for the optimal allocations that are consistent with a rational expectations market equiibrium, but it does not study how the policy can be implemented given the available policy instruments. Recently, however, King and Wolman (2004) have shown that a time-consistent policy cannot be implemented through the control of nominal money balances. In particular, they find that equilibria are not unique under a money ...
Working Paper , Paper 09-06

Journal Article
How Much Has Job Matching Efficiency Declined?

During the recession and recovery, hiring has been slower than might be expected considering the large numbers of vacant jobs and unemployed individuals. This raises some concern about structural changes in the process of matching job seekers with employers. However, the standard measures account for only the unemployed and not those who are out of the labor force. Including other non-employed groups in the measured pool of job seekers while adjusting for different job finding rates among these groups shows that the decline in matching efficiency is similar to earlier declines.
FRBSF Economic Letter

Working Paper
Notes on collateral constraints in a simple model of housing

These notes provide the derivations of results stated without proof in Hornstein (2009). For a simple model of the demand for housing, it is shown that on a balanced growth path, the rate at which the relative price of housing changes over time is determined by the relative productivity growth rates of the housing sector and the rest of the economy. The model is then modified to include a collateral constrained consumer. We show that collateral constraints may affect the level of the housing price path, but they do not affect the growth rate of housing prices.
Working Paper , Paper 09-03

Working Paper
Vintage capital as an origin of inequalities

Working Paper , Paper 02-02

Journal Article
Problems for a fundamental theory of house prices

We describe a simple model of the demand for housing and show that on a balanced growth path the rate at which the relative price of housing changes over time is determined by the relative productivity growth rates of the housing sector and the rest of the economy. A calibrated version of the model has only limited success in accounting for the increased rate of house price appreciation since the mid-1990s. We then extend the model to include a collateral constrained consumer. We show that the impact of collateral constraints is limited. Collateral constraints may affect the level of the ...
Economic Quarterly , Volume 95 , Issue Win , Pages 1-24

Working Paper
The effects of technical change on labor market inequalities

In this chapter we inspect economic mechanisms through which technological progress shapes the degree of inequality among workers in the labor market. A key focus is on the rise of U.S. wage inequality over the past 30 years. However, we also pay attention to how Europe did not experience changes in wage inequality but instead saw a sharp increase in unemployment and an increased labor share of income, variables that remained stable in the U.S. We hypothesize that these changes in labor market inequalities can be accounted for by the wave of capital-embodied technological change, which we ...
Working Paper , Paper 04-08

Inflation Targeting: Could Bad Luck Explain Persistent One-Sided Misses?

In January 2012, the Federal Open Market Committee set an explicit inflation target of 2 percent, but the annual inflation rate has been 0.25 percentage points or more below that target for the past 10 quarters. Extended periods of one-sided misses are common among inflation-targeting countries, but it is not clear whether these persistent deviations are caused by structural changes, bad policy or bad luck. Analysis of the statistical properties of the inflation process in the United States suggests that bad luck remains a plausible explanation for the FOMC's current string of one-sided ...
Richmond Fed Economic Brief , Issue Sept

Working Paper
Productivity, employment, and inventories

Marshall made at least four contributions to the classical quantity theory. He endowed it with his Cambridge cash-balance money-supply-and-demand framework to explain how the nominal money supply relative to real money demand determines the price level. He combined it with the assumption of purchasing power parity to explain (i) the international distribution of world money under metallic standards and fixed exchange rates, and (ii) exchange rate determination under floating rates and inconvertible paper currencies. He paired it with the idea of money wage and/or interest rate stickiness in ...
Working Paper , Paper 04-09

Journal Article
Growth accounting with technological revolutions

Economic Quarterly , Issue Sum , Pages 1-22

Working Paper
Home production

Studying the incentives and constraints in the non-market sector ? that is, home production ? enhances our understanding of economic behavior in the market. In particular, it helps us to understand (1) small variations of labor supply over the life cycle, (2) large variations of employment relative to wages over the business cycle, and (3) large income differences across countries.
Working Paper , Paper 06-04


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