Creator: Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 016 Description:
Paper presented at the meeting of the System Committee on Financial Analysis, Minneapolis, October, 1971.
Keyword: Money stock, Regressions, Monetarism, and Least squares regression Subject (JEL): C20 - Single Equation Models; Single Variables: General, E52 - Monetary Policy, and C30 - Multiple or Simultaneous Equation Models; Multiple Variables: General
Creator: Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 370 Abstract:
The Diamond-Dybvig model of banking (Journal of Political Economy, 1983) is amended by introducing communication barriers—these being implicit in their model and in most explanations of why people hold so-called liquid assets. These barriers imply the sequential-service constraint that Diamond and Dybvig imposed on private intermediation and have other implications: infeasibility of the policy that Diamond and Dybvig identify with deposit insurance and desirability of dependence of the realized return on deposits on the random order of withdrawals.
Keyword: Deposit insurance, Sequential service constraint, Communication barrier, Diamond, Liquid assets, Banks, and Dybvig Subject (JEL): G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Creator: Kareken, John H., Rolnick, Arthur J., 1944-, and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 000 Keyword: Optimum monetary instrument variable, Operating variables, and Proximate target variable Subject (JEL): E43 - Interest Rates: Determination, Term Structure, and Effects and E58 - Central Banks and Their Policies
Creator: Manuelli, Rodolfo E. and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 252 Abstract:
We study an overlapping generations model which contains a capital good that resembles actual gold. This capital good can he stored without physically depreciating and can, by using other resources, be converted back and forth between gold jewelry which yields utility directly and raw gold which does not.Under the assumption that the three utility-yielding objects—first and second period consumption and jewelry—are gross substitutes, stationary equilibria are shown to exist and are characterized; for some parameter values, there are inefficient equilibria, while for others there are efficient equilibria. Both types can be interpreted as commodity money equilibria.
Cover note : "An earlier version of this paper was presented at a seminar at MIT."
Keyword: Commodity money system, Commodity money equilibrium, Overlapping generations model, Capital goods, Commodities, and Commodity prices Subject (JEL): D51 - Exchange and Production Economies and E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
Creator: Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 000 Description:
This paper was published with no issue number.
Keyword: Economic models, Forecasts, Policy studies , and Neutrality view Subject (JEL): E17 - General Aggregative Models: Forecasting and Simulation: Models and Applications, R15 - General Regional Economics: Econometric and Input-Output Models; Other Models, and E52 - Monetary Policy
Creator: Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 251 Abstract:
Different conclusions about the effects of open market operations are reached even among economists using full employment and rational expectations models. I show that these can be attributed to different assumptions regarding (i) the concept of the deficit that is held fixed in the face of an open market operation, (ii) diversity among agents, and (iii) the features generating money demand. With regard to (iii), I argue that plausible ways of explaining the holding of low-return money preclude the kind of perfect credit markets needed to obtain Ricardian equivalence.
This paper was presented for the International Seminar in Public Economics, held in February 1984 at the University of California at Santa Cruz.
Keyword: Money demand, Ricardian equivalency, Open market purchases, and Deficit Subject (JEL): E41 - Demand for Money and E52 - Monetary Policy
Creator: King, Robert G. (Robert Graham), Wallace, Neil, and Weber, Warren E. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 307 Abstract:
This paper shows that there can be equilibria in which exchange rates display randomness unrelated to fundamentals. This is demonstrated in the context of a two currency, one good model, with three agent types and cash-in-advance constraints. A crucial feature is that the type i agents, for i=l, 2, must satisfy a cash—in-advance constraint by holding currency i, while type 3 agents can satisfy it by holding either currency. It is shown that real allocations vary across the multiple equilibria if markets for hedging exchange risk do not exist and that the randomness is innocuous if complete markets exist.
Keyword: Foreign exchange rates, Currencies, and Macroeconomics Subject (JEL): F31 - Foreign Exchange and E00 - Macroeconomics and Monetary Economics: General
Creator: Marimon, Ramon, 1953- and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 288 Abstract:
The consequences of costly divisibility of assets are studied using a model with the following features. The demand for assets is generated from an overlapping generations model with a continuum of agents in each generation and with intra-generation trade (intermediation) ruled out. There is a once-for-all supply of a stock of nonnegative-dividend assets in a large size, and there is a costly technology for dividing them into smaller sizes. Stationary equilibria are shown to exist. In contrast with similar models with costless divisibility of assets, competitive equilibria are not necessarily desirable; there can be Pareto-ordered equilibria.
Keyword: Depreciation, Asset, and Trade Subject (JEL): D50 - General Equilibrium and Disequilibrium: General
Creator: Townsend, Robert M., 1948- and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 209 Abstract:
We use a model of pure, intertemporal exchange with spatially and information-ally separated markets to explain the existence of private securities which circulate and, hence, play a prominent role in exchange. The model, which utilizes a perfect foresight equilibrium concept, implies that a Schelling-type coordination problem can arise. It can happen that the amounts of circulating securities that are required to support an equilibrium and that are issued at the same time in informationally separated markets must satisfy restrictions not implied by individual maximization and market clearing in each market separately.
Keyword: Schelling pure coordination game, Trade, and Debts Subject (JEL): G14 - Information and Market Efficiency; Event Studies; Insider Trading and D51 - Exchange and Production Economies
Creator: Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 024 Abstract:
In "Liquidity Preference as Behavior Towards Risk," Tobin suggests that risk aversion and expected utility maximization can provide a rigorous foundation for an equilibrium demand for money. In Tobin's model, money plays a risk reducing role in individual portfolios. This note considers whether a general equilibrium stochastic model can produce equilibrium yield distributions that allow money to play that role if money does not appear directly as an argument in the utility or production functions of the economy. The model examined, a stochastic production variant of Samuelson's model of overlapping generations, cannot produce such yield distributions.
Keyword: Risk aversion, Stochastic, and Monetary economy Subject (JEL): E41 - Demand for Money, C51 - Model Construction and Estimation, and G11 - Portfolio Choice; Investment Decisions