Exchange rates and international relative prices and quantities in equilibrium models with alternative preference specifications
Dynamic open economy models with time-separable, deterministic utilities fail to account for observed dynamics of exchange rates and international relative prices and quantities. This paper examines the ability of extensions of existing open economy models to account for exchange rates, international relative prices, and international trade quantities. The extensions involve preferences with taste shocks and nontime-separable utilities in habit persistence form. Quantitative properties of calibrated versions of the models are examined in light of time series properties of key international ...
Consumer Debt Rises for 10th Quarter in a Row
For a long time after the recession, consumers shed debt. But it?s growing again ? up 2.1 percent from the first quarter last year.
Recent trends in homeownership
The homeownership rate began to trend upward in 1995 after years of being relatively constant, near 64 percent. This article describes recent changes in the share of U.S. housing that is owner-occupied and explores the reasons for the surprising rise over the past decade. Explanations that have been offered include demographics, low mortgage rates, changes in housing policy, and innovations in the mortgage financial market. Of all these explanations, the most plausible one is that innovations in the financial markets increased access to mortgage finance, mainly by reducing downpayment ...
Liquidity and real activity in three monetary models
This paper investigates interest rate determination and evolutions of nominal and real variables in alternative monetary, general equilibrium models. Three approaches to characterizing monetary transactions services are utilized: a cash-in-advance approach, in which agents face cash constraints on goods purchases; a transaction-cost approach, in which goods are sacrificed in transactions; and a shopping-time approach, in which leisure is sacrificed in transactions. Models which employ these approaches are used to examine liquidity effects of monetary innovations on interest rates and real ...
Measuring Levels of Debt in the Eighth District’s Key Metro Areas
Debt growth and delinquency rate data do not seem to indicate that a severe debt problem may be brewing in these cities.
Accounting for changes in the homeownership rate
After three decades of being relatively constant, the homeownership rate increased over the period 1994 to 2005 to attain record highs. The objective of this paper is to account for the observed boom in ownership by examining the role played changes in demographic factors and innovations in the mortgage market which lessened downpayment requirements. To measure the aggregate and distributional impact of these factors, we construct a quantitative general equilibrium overlapping generation model with housing. We find that the long-run importance of the introduction of new mortgage products for ...
Mortgage contracts and housing tenure decisions
In this paper, we analyze various mortgage contracts and their implications for housing tenure and investment decisions using a model with heterogeneous consumers and liquidity constraints. We find that different types of mortgage contracts influence these decisions through three dimensions: the downpayment constraint, the payment schedule, and the amortization schedule. Contracts with lower downpayment requirements allow younger and lower income households to enter the housing market earlier. Mortgage contracts with increasing payment schedules increase the participation of first-time ...
Corporate Income Tax, Legal Form of Organization, and Employment
A dynamic stochastic occupational choice model with heterogeneous agents is developed to evaluate the impact of a corporate income tax reduction on employment. In this framework, the key margin is the endogenous entrepreneurial choice of the legal form of organization (LFO). A reduction in the corporate income tax burden encourages adoption of the C corporation legal form, which reduces capital constraints on ?rms. Improved capital re-allocation increases overall productive e?ciency in the economy and therefore expands the labor market. Relative to the benchmark economy, a corporate income ...
Do Firms Switch Their Legal Form of Organization When Taxes Change?
Tax-law changes can cause firms to change their organizational structure.
Corporate income tax, legal form of organization, and employment
We adopt a dynamic stochastic occupational choice model with heterogeneous agents and evaluate the impact of a potential reduction in the corporate income tax on employment. We show that a reduction in corporate income tax leads to moderate job creation. In the extreme case, the elimination of the corporate income tax would reduce the non-employed population by 5.4 percent. In the model, a reduction in the corporate income tax creates jobs through two channels, one from new entry firms and one from existing firms changing their form of legal organization. In particular, the latter accounts ...