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Working Paper
Discussion of Preston, \"Learning about monetary policy rules when long-horizon expectations matter\"
Honkapohja, Seppo (2003)
The design of interest rate rules for conducting monetary policy have recently been examined for two key concerns. The first issue is determinacy of equilibria. Indeterminacy (multiplicity of stationary rational expectations equilibria) is a concern in models of monopolistic competition and price stickiness are currently a popular framework for the study of monetary policy. The second issue is stability of equilibria under adaptive learning. Some interest rate rules do not perform well when the expectations of the agents get out of equilibrium, e.g. as a result of structural shifts.
FRB Atlanta Working Paper , Paper 2003-19

Working Paper
Drifts and volatilities: monetary policies and outcomes in the post WWII U.S.
Sargent, Thomas J.; Cogley, Timothy (2003)
For a VAR with drifting coefficients and stochastic volatilities, the authors present posterior densities for several objects that are of interest for designing and evaluating monetary policy. These include measures of inflation persistence, the natural rate of unemployment, a core rate of inflation, and "activism coefficients" for monetary policy rules. Their posteriors imply substantial variation of all of these objects for post WWII U.S. data. After adjusting for changes in volatility, persistence of inflation increases during the 1970s then falls in the 1980s and 1990s. Innovation ...
FRB Atlanta Working Paper , Paper 2003-25

Working Paper
A computationally efficient characterization of pure strategy Nash equilibria in large entry games
Cohen, Andrew M. (2005)
This note presents a simple algorithm for characterizing the set of pure strategy Nash equilibria in a broad class of entry games. The algorithm alleviates much of the computational burden associated with recently developed econometric techniques for estimating payoff functions inferred from entry games with multiple equilibria.
Finance and Economics Discussion Series , Paper 2005-37

Working Paper
Currency competition : a partial vindication of Hayek
Schreft, Stacey L.; Martin, Antoine (2003)
This paper establishes the existence of equilibria for environments in which outside money is issued competitively. Such equilibria are typically believed not to exist because of a classic overissue problem: if money is valued in equilibrium, an issuer produces money until its value is driven to zero. By backward induction, money cannot have value in the first place. However, for any given finite amount of money outstanding, a monetary economy typically has two equilibria. In one, money has value; in the other, money is not valued because no one expects it to be valued. This paper takes this ...
Research Working Paper , Paper RWP 03-04

Report
Does the time inconsistency problem make flexible exchange rates look worse than you think?
Armenter, Roc; Bodenstein, Martin (2005)
Lack of commitment in monetary policy leads to the well known Barro-Gordon inflation bias. In this paper, we argue that two phenomena associated with the time inconsistency problem have been overlooked in the exchange rate debate. We show that, absent commitment, independent monetary policy can also induce expectation traps-that is, welfare-ranked multiple equilibria-and perverse policy responses to real shocks-that is, an equilibrium policy response that is welfare inferior to policy inaction. Both possibilities imply higher macroeconomic volatility under flexible exchange rates than under ...
Staff Reports , Paper 230

Report
Short-run fiscal policy: welfare, redistribution, and aggregate effects in the short and long run
Kitao, Sagiri (2010)
This paper quantifies the effects of two short-run fiscal policies, a temporary tax cut and a temporary rebate transfer, that are intended to stimulate economic activity. A reduction in income taxation provides immediate incentives to work and save more, raising aggregate output and consumption. A temporary rebate is mostly saved and increases consumption marginally. Both policies improve the overall welfare of households, and the rebate policy especially benefits low-income households. In the long run, however, the debt accumulated to finance the stimulus and a higher tax to service the debt ...
Staff Reports , Paper 442

Conference Paper
Certainty equivalence - discussion
Wieland, Volker W. (2005)
Proceedings

Working Paper
The role of independence in the Green-Lin Diamond-Dybvig model
Wallace, Neil; Andolfatto, David; Nosal, Ed (2006)
Green and Lin study a version of the Diamond-Dybvig model with a finite number of agents, independence (independent determination of each agent?s type), and sequential service. For special preferences, they show that the ex ante first-best allocation is the unique equilibrium outcome of the model with private information about types. Via a simple argument, it is shown that uniqueness of the truth-telling equilibrium holds for general preferences, and, in particular, for a constrained-efficient allocation whether first-best or not. The crucial assumption is independence.
Working Papers (Old Series) , Paper 0615

Working Paper
General equilibrium with nonconvexities, sunspots, and money
Shell, Karl; Rupert, Peter; Wright, Randall; Rocheteau, Guillaume (2005)
We study general equilibrium with nonconvexities. In these economies there exist sunspot equilibria without the usual assumptions needed in convex economies, and they have good welfare properties. Moreover, in these equilibria, agents act as if they have quasi-linear utility. Hence wealth effects vanish. We use this to construct a new model of monetary exchange. As in Lagos-Wright, trade occurs in both centralized and decentralized markets, but while that model requires quasilinearity, we have general preferences. Given our specification looks much like the textbook Arrow-Debreu model, we ...
Working Papers (Old Series) , Paper 0513

Journal Article
Commentary on \\"Monetary policy as equilibrium selection\\"
Ireland, Peter N. (2007-07)
Review , Volume 89 , Issue Jul , Pages 343-348

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