Creator: Miller, Preston J. and Todd, Richard M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 494 Abstract:
This paper investigates the macroeconomic and welfare effects of a particular public finance decision. That decision was to use debt rather than current taxation to finance deposit insurance payments related to the savings and loan debacle. We find that this decision could have significantly raised real interest rates and affected welfare. The analysis is conducted in a dynamic, open-economy, monetary general equilibrium model in which parameters are set based on empirical observations.
Keyword: Savings and loan, Welfare, Real interest rates, Deposit insurance, Government debt, Public finance, Taxation, and S & L Subject (JEL): H63 - National Debt; Debt Management; Sovereign Debt and G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Creator: Miller, Preston J. and Todd, Richard M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 481 Abstract:
This paper investigates the effects of changes in a country's monetary policies on its economy and the welfare of its citizens and those of other countries. Each country is populated by two-period lived overlapping agents who reside in either a home service sector or a world-traded good sector. Policy effects are transmitted through changes in the real interest rate, relative prices, and price levels. Welfare effects are sometimes dominated by relative price movements and can thus be opposite of those found in one-good models. Simulation of dynamic paths also reveals that welfare effects for some types of agents reverse between those born in immediate post-shock periods and those born later.
Keyword: Exchange rates, Real interest rates, Monetary policy, Prices, and Relative prices Subject (JEL): E31 - Price Level; Inflation; Deflation, F31 - Foreign Exchange, and E52 - Monetary Policy