Creator: Edge, Rochelle Mary, 1971- and Rudd, Jeremy Bay, 1970- Series: Joint commitee on business and financial analysis Abstract:
We add a nominal tax system to a sticky-price monetary business cycle model. When nominal interest income is taxed, the coefficient on inflation in a Taylor-type monetary policy rule must be significantly larger than one in order for the model economy to have a determinate rational expectations equilibrium. When depreciation is treated as a charge against taxable income, an even larger weight on inflation is required in the Taylor rule in order to obtain a determinate and stable equilibrium. These results have obvious implications for assessing the historical conduct of monetary policy.
关键词: Monetary policy, Business cycle, Cycle, Interest, Inflation, Policy, Prices, Monetary, Rational expectation, and Tax 学科: E43 - Money and interest rates - Determination of interest rates ; Term structure of interest rates, E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation, E12 - General aggregative models - Keynes ; Keynesian ; Post-Keynesian, and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles
Creator: Erceg, Christopher J. and Levin, Andrew T. (Andrew Theo) Series: Joint commitee on business and financial analysis Abstract:
The durable goods sector is much more interest sensitive than the non-durables sector, and these sectoral differences have important implications for monetary policy. In this paper, we perform VAR analysis of quarterly US data and find that a monetary policy innovation has a peak impact on durable expenditures that is roughly five times as large as its impact on non-durable expenditures. We then proceed to formulate and calibrate a two-sector dynamic general equilibrium model that roughly matches the impulse response functions of the data. We derive the social welfare function and show that the optimal monetary policy rule responds to sector-specific inflation rates and output gaps. We show that some commonlyprescribed policy rules perform poorly in terms of social welfare, especially rules that put a higher weight on inflation stabilization than on output gap stabilization. By contrast, it is interesting that certain rules that react only to aggregate variables, including aggregate output gap targeting and rules that respond to a weighted average of price and wage inflation, may yield a welfare level close to the optimum given a typical distribution of shocks.
关键词: Monetary policy, Consumer, Business cycles, Durable goods, and Social welfare 学科: E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation, E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy, and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles
Creator: Geweke, John. Series: New methods in business cycle research Abstract:
A simple stochastic model of the firm is constructed in which a dynamic monopolist who maximizes a discounted profits stream subject to labor adjustment costs and given factor prices sets output price as a distributed lag of past wages and input prices. If the observed relation of wages and prices in manufacturing arises solely from this behavior then wages and input prices are exogenous with respect to output prices. In tests using quarterly and monthly series for the straight time wage, an index of raw materials prices and the wholesale price index for manufacturing and its durable and nondurable subsectors this hypothesis cannot be refuted for the period 1955:1 to 1971:11. During the period 1926:1 to 1940:11, however, symmetrically opposite behavior is observed manufacturing wholesale prices are exogenous with respect to the wage rate, a relation which can arise if dynamically monopsonistic firms compete in product markets. Neither structural relation has withstood direct wage and price controls.
关键词: Wages, Manufacturing, Labor, Wholesale, and Prices 学科: E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation, L60 - Industry Studies: Manufacturing: General, and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles
Creator: Backus, David. and Kehoe, Patrick J. Series: Conference on economics and politics Abstract:
We document properties of business cycles in ten countries over the last hundred years, contrasting the behavior of real quantities with that of the price level and the stock of money. Although the magnitude of output fluctuations has varied across countries and periods, relations among variables have been remarkably uniform. Consumption has generally been about as variable as output, and investment substantially more variable, and both have been strongly procydical. The trade balance has generally been countercyclical. The exception to this regularity is government purchases, which exhibit no systematic cyclical tendency. With respect to the size of output fluctuations, standard deviations are largest between the two world wars. In some countries (notably Australia and Canada) they are substantially larger prior to World War I than after World War II, but in others (notably Japan and the United Kingdom) there is little difference between these periods. Properties of price levels, in contrast, exhibit striking differences between periods. Inflation rates are more persistent after World War II than before, and price level fluctuations are typically procyclical before World War II, countercyclical afterward. We find no general tendency toward increased persistence in money growth rates, but find that fluctuations in money are less highly correlated with output in the postwar period.
学科: E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles