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Content Type:Report 

Usury laws and the housing market: the Minnesota experience

Staff Report , Paper 39

Technology, trade and growth: some empirical findings

International patent data for 39 countries from 1970 to 1985 are used to create proxies for imitation and innovation. Domestic imitation and innovation both appear to depend positively on high technology imports from developed countries, intellectual property rights, and the size of the economy. Additionally, transportation and communication infrastructure and quality adjusted research effort are found to contribute positively to domestic innovation. Finally, growth in real per capita GDP is positively related to physical capital stock growth, foreign and domestic innovation, and negatively ...
Research Paper , Paper 9727

Robust capital regulation

Banks? leverage choices represent a delicate balancing act. Credit discipline argues for more leverage, while balance-sheet opacity and ease of asset substitution argue for less. Meanwhile, regulatory safety nets promote ex post financial stability, but also create perverse incentives for banks to engage in correlated asset choices and to hold little equity capital. As a way to cope with these distorted incentives, we outline a two-tier capital framework for banks. The first tier is a regular core capital requirement that helps deter excessive risk-taking incentives. The second tier, a novel ...
Staff Reports , Paper 490

"Beggar-thy-neighbor" or "beggar-thyself"? the income effect of exchange rate fluctuations

This paper analyzes the impact of exchange rate fluctuations when they are only partially passed through to consumer prices. We show that an exchange rate depreciation does not necessarily have a beggar-thy-neighbor effect and may in fact have an opposite, or beggar-thyself, effect. The direction of the welfare effect depends on who owns the firms importing goods from producers and selling them to consumers, an issue that has not been explored in the earlier literature
Staff Reports , Paper 112

Supplementary appendix: Careers in firms: estimating a model of learning, job assignment, and human capital aquisition

In this appendix I present details of the model and of the empirical analysis and results of counterfactual experiments omitted from the paper. In Section 1 I describe a simple example that illustrates how, even in the absence of (technological) human capital acquisition, productivity shocks, or separation shocks, the learning component of the model can naturally generate mobility between jobs within a firm and turnover between firms. I also present omitted details of the proofs of Propositions 1, 2, and 3 in the paper. In Section 2 I provide an overview of the numerical solution of the ...
Staff Report , Paper 470

On the need for a new approach to analyzing monetary policy

We present a pricing kernel that summarizes well the main features of the dynamics of interest rates and risk in postwar U.S. data and use it to uncover how the pricing kernel has moved with the short rate. Our findings imply that standard monetary models miss an essential link between the central bank instrument and the economic activity that monetary policy is intended to affect, and thus we call for a new approach to monetary policy analysis. We sketch a new approach using an economic model based on our pricing kernel. The model incorporates the key relationships between policy and risk ...
Staff Report , Paper 412

Fragility of reputation and clustering of risk-taking

Concerns about constructing and maintaining good reputations are known to reduce borrowers' excessive risk-taking. However, I find that the self-discipline induced by these concerns is fragile, and can break down without obvious changes in economic fundamentals. Furthermore, in the aggregate, breakdowns are clustered among borrowers with intermediate and good reputations, which can exacerbate an economy's weakness and contribute to a broad economic crisis. These results come from an aggregate dynamic global game analysis of reputation formation in credit markets. The selection of a unique ...
Staff Report , Paper 431

On the existence and uniqueness of nonoptimal equilibria in dynamic stochastic economies

The question of the existence and uniqueness of a stationary equilibrium for distorted versions of the standard neoclassical growth model is addressed in this paper. The conditions presented guaranteeing the existence and uniqueness of nontrivial equilibrium for the class of economies under study are simple and intuitively appealing, while the existence and uniqueness proof developed is elementary. Examples are presented illustrating that economies with distortional taxation, endogenous growth with externalities, and monopolistic competition can all fit into the framework developed.
Staff Report , Paper 151

Chaotic dynamics and bifurcation in a macro model

The qualitative dynamics of a discrete time version of a deterministic, continuous time, nonlinear macro model formulated by Haavelmo are fully characterized. Recently developed methods of symbolic dynamics and ergodic theory are shown to provide a simple, effective means of analyzing the behavior of the resulting one-parameter family of first-order, deterministic, nonlinear difference equations. A complex periodic and random ?aperiodic? orbit structure dependent on a key structural parameter is present, which contrasts with the total absence of such complexity in Haavelmo?s continuous time ...
Staff Report , Paper 55

Markov switching in disaggregate unemployment rates

We develop a dynamic factor model with Markov switching to examine secular and business cycle fluctuations in U.S. unemployment rates. We extract the common dynamics among unemployment rates disaggregated for seven age groups. The framework allows analysis of the contribution of demographic factors to secular changes in unemployment rates. In addition, it allows examination of the separate contribution of changes due to asymmetric business cycle fluctuations. We find strong evidence in favor of the common factor and of the switching between high and low unemployment rate regimes. We also find ...
Staff Reports , Paper 132



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