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Journal Article
Tax structure, optimal fiscal policy, and the business cycle
The development of a real business cycle model in which government fiscal variables such as tax rates and public expenditures are endogenous. The authors characterize the "optimal" behavior of these policy variables over the business cycle and relate this behavior to movements in private-sector variables like output, consumption, labor hours, and investment.
Journal Article
The national debt: a secular perspective
An examination of the various factors that have determined the level and growth of the federal debt over the past 40 years, with some perspective on future levels of federal debt.
Journal Article
Settlement delays and stock prices
An analysis of whether investors consider the length of the settlement delay between the time a stock trade is executed and the security is delivered. By modeling stock returns and conducting regression tests, the author concludes that stock prices do reflect the effects of the settlement delay.
Journal Article
The consumer price index as a measure of inflation
An estimation of a price index that is immune to some of the weighting biases that can hinder the use of the Consumer Price Index as a reliable measure of inflation.
Journal Article
New Classical and New Keynesian models of business cycles
A presentation of simple, but complete, New Classical and New Keynesian models of the economy and business cycles that illustrate the central force behind fluctuations in each. Theoretical and statistical arguments for and against each model are discussed.
Journal Article
New results on the rationality of survey measures of exchange-rate expectations
In light of research questioning the usefulness of economists' models of exchange-rate determination, this paper investigates the rationality of survey measures of expectations for Deutschmark/dollar exchange rates for 1989-97. Using Liu and Maddala's (1992) "restricted cointegration" test, the author cannot reject the assumption that survey measures are unbiased exchange-rate forecasts. This finding is related to market participants' anticipation of the impact of economic policies.
Journal Article
The sources and nature of long-term memory in aggregate output
This article examines the stochastic properties of aggregate macroeconomic time series from the standpoint of fractionally integrated models, focusing on the persistence of economic shocks. The authors develop a simple macroeconomic model that exhibits long-range dependence, a consequence of aggregation in the presence of real business cycles. To implement these results empirically, they employ a test for fractionally integrated time series based on the Hurst-Mandelbrot rescaled range. This test is robust to short-range dependence and is applied to quarterly and annual real GDP to determine ...
Journal Article
Monetary policy and asset prices with imperfect credit markets
The Modigliani-Miller theorem is fundamental to the theory of corporate finance. One of the theorem's immediate implications is that there is no reason for the monetary authority to respond to asset prices. This article posits a world in which the Modigliani-Miller theorem does not hold. The authors assume that the amount of an entrepreneur's external financing is limited by the amount of collateral she holds. They examine the implications for the monetary authority in such an environment.
Journal Article
Banking consolidation and correspondent banking
Banking consolidation, spurred by interstate branching deregulation, is changing markets' competitive structure. Policymakers and regulators have focused on the implications for customers in retail and wholesale markets rather than consolidation's impact on correspondent banking markets (where banks buy and sell inputs used to produce banking services). By studying the era of intrastate branching deregulation, the authors provide some insights on the implications of interstate branching for correspondent banking.
Journal Article
A proportional hazards model of bank failure: an examination of its usefulness as an early warning tool
An explanation of how a Cox proportional hazards model can be used to identify both failed and healthy banks with a high degree of accuracy using a relatively small set of publicly available data.