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Series:Working Papers in Applied Economic Theory 

Working Paper
What do money market models tell us about how to implement monetary policy: reply

Working Papers in Applied Economic Theory , Paper 108

Working Paper
The search for a stable money demand function: a survey of the post- 1973 literature

Working Papers in Applied Economic Theory , Paper 109

Working Paper
Dynamic adjustment in the demand for money: tests of alternative hypotheses

Working Papers in Applied Economic Theory , Paper 110

Working Paper
Estimating dynamic rational expectations models when the trend specification is uncertain

This paper explores various strategies for estimating rational expectations models when the trend specification is uncertain. One approach modified the likelihood function in order to reduce the influence of low-frequency dynamics. Hansen and Sargent (1993) conjectured that this would have little cost in correctly specified models and would improve estimated in mis-specified models. This paper confirms the first part of their conjecture but not the second. Contrary to intuition, the effects of trend-specification errors are spread across the entire frequency domain and are not confined to ...
Working Papers in Applied Economic Theory , Paper 96-01

Working Paper
Capital flows and macroeconomic management: tequila lessons

Working Papers in Applied Economic Theory , Paper 96-02

Working Paper
Monetary union and macroeconomic stabilization

Working Papers in Applied Economic Theory , Paper 96-03

Working Paper
Expectations, traps and discretion

We argue that discretionary monetary policy exposes the economy to welfare-decreasing instability. It does so by creating the potential for private expectations about the response of monetary policy to exogenous shocks to be self-fulfilling. Among the many equilibria that are possible, some have good welfare properties. But, others exhibit welfare decreasing volatility in output and employment. We refer to the latter type of equilibria as expectation traps. In effect, our paper presents a new argument for commitment in monetary policy because commitment eliminates these bad equilibria. ...
Working Papers in Applied Economic Theory , Paper 96-04

Working Paper
Do measures of monetary policy in a VAR make sense?

No. In many VARs, monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables. Such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the Fed's reaction function; furthermore, the residuals from these regressions have little correlation with funds rate shocks that are derived from forward-looking financial markets.
Working Papers in Applied Economic Theory , Paper 96-05

Working Paper
Measuring the liquidity effect

This paper develops a measure of the immediate effect on the federal funds rate of an open market operation. Because open market operations are often responses to current or anticipated economic developments, there is a serious problem of simultaneous equations bias in measuring this effect. This paper resolves this problem by developing a proxy for the errors the Federal Reserve makes in forecasting the extent to which Treasury operations will add or drain reserves available to private banks. These errors induce fluctuations in bank reserve which have measurable consequences for the ...
Working Papers in Applied Economic Theory , Paper 96-06

Working Paper
Inequality and stability

This paper analyzes how political stability depends on economic factors. Fluctuations in groups' economic capacities and in their abilities to engage in rent-seeking or predatory behavior create periodic incentives for those groups to renege on their social obligations. A constitution remains in force so long as no party wishes to defect to the noncooperative situation, and it is reinstituted as soon as each party finds it to its advantage to revert to cooperation. Partnerships of equals are easier to sustain than are arrangements in which one party is more powerful in some economic or ...
Working Papers in Applied Economic Theory , Paper 96-08

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Hutchison, Michael M. 13 items

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