Creator: Fogli, Alessandra and Perri, Fabrizio Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 512 Abstract:
Does macroeconomic volatility/uncertainty affect accumulation of net foreign assets? In OECD economies over the period 1970-2012, changes in country specific aggregate volatility are, after controlling for a wide array of factors, significantly positively associated with net foreign asset position. An increase in volatility (measured as the standard deviation of GDP growth) of 0.5% over period of 10 years is associated with an increase in the net foreign assets of around 8% of GDP. A standard open economy model with time varying aggregate uncertainty can quantitatively account for this relationship. The key mechanism is precautionary motive: more uncertainty induces residents to save more, and higher savings are in part channeled into foreign assets. We conclude that both data and theory suggest uncertainty/volatility is an important determinant of the medium/long run evolution of external imbalances in developed countries.
Keyword: Global imbalances, Precautionary saving, Business cycles, Current account, and Uncertainty Subject (JEL): F34 - International Lending and Debt Problems, F41 - Open Economy Macroeconomics, and F32 - Current Account Adjustment; Short-term Capital Movements
Creator: Stutzer, Michael J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 300 Keyword: Risk, Infinite hyperreal number, Equilibrium analysis, Hyperinfinite probability theory, and Uncertainty Subject (JEL): D81 - Criteria for Decision-Making under Risk and Uncertainty and C68 - Computable General Equilibrium Models
Creator: Miller, Preston J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 173 Description:
This paper reviews selected studies in the theory of macroeconomic stabilization policy and summarizes their key findings.
Keyword: Macroeconomic stabilzation policy, Stabilization theory, and Uncertainty Subject (JEL): E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy and D80 - Information, Knowledge, and Uncertainty: General
Creator: Townsend, Robert M., 1948- Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 077 Abstract:
This thesis consists of a series of essays on the theory of exchange under uncertainty. The first essay examines the welfare implications of futures markets in the context of complete markets for contingent claims. It is shown that in a C-good, S-state world the equilibrium allocations resulting from the operation of pre-state noncontingent futures markets and post-state spot markets may be Pareto optimal. This proposition turns on the fact that a futures contract can be interpreted as a security whose state-specific return is the post-state spot price. If the matrix of spot prices has rank S, then, with futures and spot markets, agents can achieve the same allocations over states as with complete markets for contingent claims.
Keyword: Uncertainty and Markets Subject (JEL): D80 - Information, Knowledge, and Uncertainty: General, Y40 - Dissertations (unclassified), and G10 - General Financial Markets: General (includes Measurement and Data)
Creator: Sargent, Thomas J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 032 Keyword: Choices, Uncertainty, and Behavior Subject (JEL): D80 - Information, Knowledge, and Uncertainty: General