Creator: Bryant, John B. and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 123 Abstract:
In "Open Market Operations in a Model of Regulated, Insured Intermediaries" [JPE, forthcoming] we show that once-for-all open market purchases need not be inflationary. Here we show this result can carry over to various stationary accommodation rules given stochastic deficits. In particular, the inflationary and deflationary effects of stochastic deficits are not offset by, nor welfare improved by, a monetary policy that leans toward monetarism. Moreover, a constant money growth rule is not in the class of stationary policies given the kind of stochastic deficit we analyze, which by itself is a serious indictment of the monetarist proposal.
Stichwort: Accomodation rules, Inflation, Monetarism, Debt, and Deflation Fach: E51 - Money Supply; Credit; Money Multipliers and H62 - National Deficit; Surplus
Creator: Bryant, John B. and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 109 Stichwort: Equilibrium, Open market purchases, Samuelson's pure consuption loans model, and Deflation Fach: E51 - Money Supply; Credit; Money Multipliers and E58 - Central Banks and Their Policies
Creator: Cole, Harold Linh, 1957-, Leung, Ron, and Ohanian, Lee E. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 356 Abstract:
This paper presents a dynamic, stochastic general equilibrium study of the causes of the international Great Depression. We use a fully articulated model to assess the relative contributions of deflation/monetary shocks, which are the most commonly cited shocks for the Depression, and productivity shocks. We find that productivity is the dominant shock, accounting for about 2/3 of the Depression, with the monetary shock accounting for about 1/3. The main reason deflation doesn’t account for more of the Depression is because there is no systematic relationship between deflation and output during this period. Our finding that a persistent productivity shock is the key factor stands in contrast to the conventional view that a continuing sequence of unexpected deflation shocks was the major cause of the Depression. We also explore what factors might be causing the productivity shocks. We find some evidence that they are largely related to industrial activity, rather than agricultural activity, and that they are correlated with real exchange rates and non-deflationary shocks to the financial sector.
Stichwort: Deflation, Great Depression, Monetary Shocks, and Productivity Shocks Fach: F40 - Macroeconomic Aspects of International Trade and Finance: General and E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)