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Creator: Braun, R. Anton and Christiano, Lawrence J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 529 Abstract:
The money demand literature presents much conflicting evidence on this question. For example, Lucas (1988) reports unrestricted money demand regressions which seem to imply that long-run money demand elasticities are highly unstable across subsamples. At the same time, he also presents evidence from money demand regressions with the income elasticity restricted to unity which seem to suggest stability. We conduct a formal analysis which weighs these apparently conflicting facts to determine which hypothesis is more plausible; the hypothesis that money demand is stable, or the hypothesis that money demand is unstable. We find that the stability hypothesis is the more plausible one. Thus, according to our data set, the answer to the question in the title is "yes".
Palabra clave: M1, Money supply, Money demand, Regression analysis, and Money demand regressions Tema: E41 - Demand for Money and E51 - Money Supply; Credit; Money Multipliers
Creator: Braun, R. Anton and McGrattan, Ellen R. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 527 Palabra clave: Homework, Employment, Women, Family labor supply, Men, Hours per worker , and Household production Tema: J22 - Time Allocation and Labor Supply and D13 - Household Production and Intrahousehold Allocation
Creator: Braun, R. Anton and McGrattan, Ellen R. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 519 Palabra clave: Government expenditures, Average weekly hours, World War II, Government purchases, Civilian employment, and Hours of labor Tema: J22 - Time Allocation and Labor Supply and H56 - National Security and War
Creator: Braun, R. Anton Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 506 Abstract:
This paper investigates the macroeconomic effects of cyclical fluctuations in marginal tax rates. It finds that systematically including tax variables in a standard real business cycle model substantially improves the model's ability to reproduce basic facts about postwar U.S. business cycle fluctuations. In particular, modeling fluctuations in personal and corporate income tax rates increases the model's predicted relative variability of hours and decreases its predicted correlation between hours and average productivity. Fluctuations in tax rates produce large substitution effects that alter the leisure/labor supply decision.
Palabra clave: Corporate tax , Taxes, Business cycle, Tax, Income tax, Tax rates, Real business cycle model, Productivity, and Taxation Tema: E32 - Business Fluctuations; Cycles, H25 - Business Taxes and Subsidies including sales and value-added (VAT), and H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Creator: Braun, R. Anton, Todd, Richard M., and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 586 Abstract:
The distinguishing feature of natural-catastrophe risk is claimed to be aggregate risk. Because such risk is encompassed in the general competitive model, it seems to pose no new theoretical challenge. However, that model has markets contingent on exogenous events, while the actual economy seems to be developing mainly markets contingent on the level of total damage. In the context of a model with aggregate risk and endogenous total damage, a notion of competitive markets contingent on total damage is formulated. That notion implies that such markets achieve the same (efficient) risk sharing as markets contingent on exogenous events.
Creator: Braun, R. Anton and Evans, Charles, 1958- Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 575 Abstract:
In aggregate unadjusted data, measured Solow residuals exhibit large seasonal variations. Total Factor Productivity grows rapidly in the fourth quarter at an annual rate of 16 percent and regresses sharply in the first quarter at an annual rate of –24 percent. This paper considers two potential explanations for the measured seasonal variation in the Solow residual: labor hoarding and increasing returns to scale. Using a specification that allows for no exogenous seasonal variation in technology and a single seasonal demand shift in the fourth quarter, we ask the following question: How much of the total seasonal variation in the measured Solow residual can be explained by Christmas? The answer to this question is surprising. With increasing returns and time varying labor effort, Christmas is sufficient to explain the seasonal variation in the Solow residual, consumption, average productivity, and output in all four quarters. Our analysis of seasonally unadjusted data uncovers important roles for labor hoarding and increasing returns which are difficult to identify in adjusted data.
Creator: Aiyagari, S. Rao and Braun, R. Anton Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 565 Abstract:
We consider the nature of optimal cyclical monetary policy in three different stochastic models with various shocks. The first is a pure liquidity effect model, the second is a cost of changing prices model, and the third is an optimal seinorage model. In each case we solve for the optimal monetary policy and describe how money growth and interest rates respond to shocks under the optimal policy. The shocks we consider are money demand shocks, productivity shocks, and government consumption shocks. All of the models have the feature that the Friedman rule of setting the nominal interest rate to zero is not optimal. Optimal policies are always time inconsistent even though lump sum taxation is allowed. At least in some instances we find that optimal policy dictates responses of money growth and interest rates which run counter to conventional wisdom.
Creator: Aiyagari, S. Rao, Braun, R. Anton, and Eckstein, Zvi Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 551 Abstract:
This paper is motivated by a variety of empirical observations on the comovements of currency velocity, inflation, and the relative size of the “credit services” sector. By the credit services sector we mean the part of banking and credit sector which provides alternative means of transactions to using currency as well as other services which help people economize on currency. We incorporate the credit services sector into a monetary growth model. Our model makes two specific and new contributions. The first is to show that direct quantitative evidence on the welfare cost of low inflation using measures of the relative size of an appropriately defined credit services sector for the U.S.—essentially the cost incurred by banks and credit unions in providing demand deposit and credit card services—is consistent with the welfare cost measured using an estimated money demand curve following the classic analysis of Bailey (1956) and the more recent analysis of Lucas (1993). Both of these measures amount to about 0.5 percent of GNP. The second contribution is in providing welfare cost of inflation estimates over a range of inflation rates which have some new features. We find that the total welfare cost of inflation remains bounded at about 5 percent of consumption.
Tema: E51 - Money Supply; Credit; Money Multipliers and E31 - Price Level; Inflation; Deflation
Creator: Braun, R. Anton and Evans, Charles, 1958- Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 168 Abstract:
We consider a dynamic, stochastic equilibrium business cycle model which is augmented to reflect seasonal shifts in preferences, technology, and government purchases. Our estimated parameterization implies implausibly large seasonal variation in the state of technology: rising at an annual rate of 24% in the fourth quarter and falling at an annual rate of 28% in the first quarter. Furthermore, our findings indicate that variation in the state of technology of this magnitude is required if the model is to explain the main features of the seasonal cycle.
Palabra clave: Solow residuals, Seasonality, and Real business cycle Tema: E32 - Business Fluctuations; Cycles and E20 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data)