Risultati della ricerca
Creator: Alvarez, Fernando, 1964-, Kehoe, Patrick J., and Neumeyer, Pablo Andrés Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 305 Abstract:
We show that optimal monetary and fiscal policies are time consistent for a class of economies often used in applied work, economies appealing because they are consistent with the growth facts. We establish our results in two steps. We first show that for this class of economies, the Friedman rule of setting nominal interest rates to zero is optimal under commitment. We then show that optimal policies are time consistent if the Friedman rule is optimal. For our benchmark economy in which the time consistency problem is most severe, the converse also holds: if optimal policies are time consistent, then the Friedman rule is optimal.
Creator: Conesa, Juan Carlos, Kehoe, Timothy Jerome, 1953-, Nygaard, Vegard M., and Raveendranathan, Gajendran Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 583 Abstract:
We develop and calibrate an overlapping generations general equilibrium model of the U.S. economy with heterogeneous consumers who face idiosyncratic earnings and health risk to study the implications of exogenous trends in increasing college attainment, decreasing fertility, and increasing longevity between 2005 and 2100. While all three trends contribute to a higher old age dependency ratio, increasing college attainment has different macroeconomic implications because it increases labor productivity. Decreasing fertility and increasing longevity require the government to increase the average labor tax rate from 32.0 to 44.4 percent. Increasing college attainment lowers the required tax increase by 10.1 percentage points. The required tax increase is higher under general equilibrium than in a small open economy with a constant interest rate because the reduction in the interest rate lowers capital income tax revenues.
Parola chiave: College attainment, Overlapping generations, Aging, Health care, and Taxation Soggetto: I13 - Health Insurance, Public and Private, J11 - Demographic Trends, Macroeconomic Effects, and Forecasts, H51 - National Government Expenditures and Health, H20 - Taxation, Subsidies, and Revenue: General, and H55 - Social Security and Public Pensions
Creator: Heathcote, Jonathan and Tsujiyama, Hitoshi Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 507 Abstract:
What structure of income taxation maximizes the social benefits of redistribution while minimizing the social harm associated with distorting the allocation of labor input? Many authors have advocated scrapping the current tax system, which redistributes primarily via marginal tax rates that rise with income, and replacing it with a flat tax system, in which marginal tax rates are constant and redistribution is achieved via non-means-tested transfers. In this paper we compare alternative tax systems in an environment with distinct roles for public and private insurance. We evaluate alternative policies using a social welfare function designed to capture the taste for redistribution reflected in the current tax system. In our preferred specification, moving to the optimal flat tax policy reduces welfare, whereas moving to the optimal fully nonlinear Mirrlees policy generates only tiny welfare gains. These findings suggest that proposals for dramatic tax reform should be viewed with caution.
Parola chiave: Optimal income taxation, Tax progressivity, Social welfare functions, Private insurance, Flat tax, Mirrlees taxation, and Ramsey taxation Soggetto: H21 - Taxation and Subsidies: Efficiency; Optimal Taxation, E62 - Fiscal Policy, H23 - Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies, and H31 - Fiscal Policies and Behavior of Economic Agents: Household
Creator: Arellano, Cristina, Bai, Yan, Bocola, Luigi, and test Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 547 Abstract:
This paper measures the output costs of sovereign risk by combining a sovereign debt model with firm- and bank-level data. In our framework, an increase in sovereign risk lowers the price of government debt and has an adverse impact on banks’ balance sheets, disrupting their ability to finance firms. Importantly, firms are not equally affected by these developments: those that have greater financing needs and borrow from banks that are more exposed to government debt cut their production the most in a debt crisis. We measure the extent of this heterogeneity using Italian data and parameterize the model to match these cross-sectional facts. In counterfactual analysis, we find that heightened sovereign risk was responsible for one-third of the observed output decline during the 2011-2012 crisis in Italy.
Parola chiave: Business cycles, Sovereign debt crises, Firm heterogeneity, Financial intermediation, and Micro data Soggetto: G12 - Asset Pricing; Trading Volume; Bond Interest Rates, F34 - International Lending and Debt Problems, E44 - Financial Markets and the Macroeconomy, and G15 - International Financial Markets
Creator: Koijen, Ralph S. J. and Yogo, Motohiro Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 510 Abstract:
We develop an asset pricing model with flexible heterogeneity in asset demand across investors, designed to match institutional and household holdings. A portfolio choice model implies characteristics-based demand when returns have a factor structure and expected returns and factor loadings depend on the assets' own characteristics. We propose an instrumental variables estimator for the characteristics-based demand system to address the endogeneity of demand and asset prices. Using U.S. stock market data, we illustrate how the model could be used to understand the role of institutions in asset market movements, volatility, and predictability.
Parola chiave: Liquidity, Institutional investors, Asset pricing model, Demand system, and Portfolio choice Soggetto: G12 - Asset Pricing; Trading Volume; Bond Interest Rates and G23 - Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
Creator: Ai, Hengjie and Bhandari, Anmol Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 570 Abstract:
This paper studies asset pricing in a setting in which idiosyncratic risk in human capital is not fully insurable. Firms use long-term contracts to provide insurance to workers, but neither side can commit to these contracts; furthermore, worker-firm relationships have endogenous durations owing to costly and unobservable effort. Uninsured tail risk in labor earnings arises as a part of an optimal risk-sharing scheme. In the general equilibrium, exposure to the resulting tail risk generates higher risk premia, more volatile returns, and variations in expected returns across firms. Model outcomes are consistent with the cyclicality of factor shares in the aggregate, and the heterogeneity in exposures to idiosyncratic and aggregate shocks in the cross section.
Parola chiave: Equity premium puzzle, Dynamic contracting, Tail risk, and Limited commitment Soggetto: G10 - General Financial Markets: General (includes Measurement and Data) and E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Creator: Atkeson, Andrew, Eisfeldt, Andrea L., Weill, Pierre-Olivier, and d'Avernas, Adrien Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 567 Abstract:
Banks' ratio of the market value to book value of their equity was close to 1 until the 1990s, then more than doubled during the 1996-2007 period, and fell again to values close to 1 after the 2008 financial crisis. Sarin and Summers (2016) and Chousakos and Gorton (2017) argue that the drop in banks' market-to-book ratio since the crisis is due to a loss in bank franchise value or profitability. In this paper we argue that banks' market-to-book ratio is the sum of two components: franchise value and the value of government guarantees. We empirically decompose the ratio between these two components and find that a large portion of the variation in this ratio over time is due to changes in the value of government guarantees.
Parola chiave: Risk shifting, Bank valuation, Banking, Bank financial soundness, Bank regulation, and Bank leverage Soggetto: G28 - Financial Institutions and Services: Government Policy and Regulation, G38 - Corporate Finance and Governance: Government Policy and Regulation, G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages, H12 - Crisis Management, G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill, and E44 - Financial Markets and the Macroeconomy
Creator: Ohanian, Lee E., Restrepo-Echavarria, Paulina, and Wright, Mark L. J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 563 Abstract:
After World War II, international capital flowed into slow-growing Latin America rather than fast-growing Asia. This is surprising as, everything else equal, fast growth should imply high capital returns. This paper develops a capital flow accounting framework to quantify the role of different factor market distortions in producing these patterns. Surprisingly, we find that distortions in labor markets — rather than domestic or international capital markets — account for the bulk of these flows. Labor market distortions that indirectly depress investment incentives by lowering equilibrium labor supply explain two-thirds of observed flows, while improvement in these distortions over time accounts for much of Asia’s rapid growth.
Parola chiave: International capital markets, Domestic capital markets, Capital flows, and Labor markets Soggetto: J20 - Demand and Supply of Labor: General, E21 - Macroeconomics: Consumption; Saving; Wealth, F41 - Open Economy Macroeconomics, and F21 - International Investment; Long-term Capital Movements
Creator: Mongey, Simon J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 558 Abstract:
I propose an equilibrium menu cost model with a continuum of sectors, each consisting of strategically engaged firms. Compared to a model with monopolistically competitive sectors that is calibrated to the same data on good-level price flexibility, the dynamic duopoly model features a smaller inflation response to monetary shocks and output responses that are more than twice as large. The model also implies (i) four times larger welfare losses from nominal rigidities, (ii) smaller menu costs and idiosyncratic shocks are needed to match the data, (iii) a U-shaped relationship between market concentration and price flexibility, for which I find empirical support.
Parola chiave: Firm dynamics, Menu costs, Oligopoly, and Monetary policy Soggetto: L13 - Oligopoly and Other Imperfect Markets, E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data), E51 - Money Supply; Credit; Money Multipliers, L11 - Production, Pricing, and Market Structure; Size Distribution of Firms, and E39 - Prices, Business Fluctuations, and Cycles: Other