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Working Paper
The European unemployment dilemma
Journal Article
A reply to Darby
Working Paper
\"Dollarization,\" seignorage, and the demand for money
Working Paper
The evolution of small change
Western Europe was plagued with currency shortages from the 14th to the 19th century, at which time a `standard formula' had been devised to cure the problem. We document the evolution of mon- etary theory, policy experiments and minting tech- nology over the course of six hundred years. In a companion paper, we use a cash-in-advance model of commodity money to provide an analytical frame- work for the problem of small change.
Report
The dimensionality of the aliasing problem in models with rational spectral densities
This paper reconsiders the aliasing problem of identifying the parameters of a continuous time stochastic process from discrete time data. It analyzes the extent to which restricting attention to processes with rational spectral density matrices reduces the number of observationally equivalent models. It focuses on rational specifications of spectral density matrices since rational parameterizations are commonly employed in the analysis of the time series data.
Working Paper
Managing expectations and fiscal policy
This paper studies an optimal fiscal policy problem of Lucas and Stokey (1983) but in a situation in which the representative agent's distrust of the probability model for government expenditures puts model uncertainty premia into history-contingent prices. This situation gives rise to a motive for expectation management that is absent within rational expectations and a novel incentive for the planner to smooth the shadow value of the agent's subjective beliefs to manipulate the equilibrium price of government debt. Unlike the Lucas and Stokey (1983) model, the optimal allocation, tax rate, ...
Working Paper
Impacts of priors on convergence and escapes from Nash inflation
Recent papers have analyzed how adaptive agents may converge to and escape from self-confirming equilibria. All of these papers have imputed to agents a particular prior about drifting coefficients. In the context of a model of monetary policy, this paper analyzes dynamics that govern both convergence and escape under a more general class of priors for the government. The authors characterize how the shape of the prior influences the dynamics in important ways. There are priors for which the E-stability condition is not enough to assure local convergence to a self-confirming equilibrium. ...
Report
Identification of continuous time rational expectations models from discrete time data
This paper shows how the cross-equation restrictions implied by dynamic rational expectations models can be used to resolve the aliasing identification problem. Using a continuous time, linear-quadratic optimization environment, this paper describes how the resulting restrictions are sufficient to identify the parameters of the underlying continuous time process when it is known that the true continuous time process has a rational spectral density matrix.
Journal Article
A supply-side explanation of European unemployment
This article offers a supply-side explanation of striking patterns in unemployment rates and duration of unemployment in European countries, compared with other member countries of the OECD (Organization for Economic Cooperation and Development). The rise in long-term unemployment in Europe is attributed to the adverse incentive effects of generous welfare programs in times of economic turbulence.