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: 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: Smith, Bruce D., d. 2002. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 219 Abstract:
This paper comments on "The Real Bills Doctrine vs. the Quantity-Theory: a Reconsideration" by T. Sargent and N. Wallace. It argues that there exists a class of models similar to theirs that is (a) favorable to the quantity theory view of price stability, (b) supports the imposition of 100 percent reserve requirements, and (c) explains a long history of legal credit restrictions. In particular, lending restrictions stabilize price levels and result in Pareto improvements.
关键词: Loans, Banks, Quantity theory, Price level stability, Quantity-theory, and Lending 学科: E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation and G28 - Financial institutions and services - Government policy and regulation
Creator: Smith, Bruce D., d. 2002. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 221 Abstract:
This paper considers a view commonly associated with the "quantity theory of money": that banks should face 100 percent reserve requirements. It argues first that the objectives of the quantity theorists' proposals were more than merely price level stability, and that in fact, price level stability was at most a secondary objective of their proposals. Second, it argues that these theorists had a world with distortions in mind with respect to their proposals. These are present in a special setting examined that (a) supports the imposition of 100 percent reserve requirements (on the basis of an unconstrained Pareto criterion), and (b) supports the view that these restrictions stabilize the price level and make its movements more "predictable."
关键词: Loans, Quantity-theory, Quantity theory, Price level stability, Banks, and Lending 学科: E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation and G28 - Financial institutions and services - Government policy and regulation
Creator: Rotemberg, Julio. Series: Lucas expectations anniversary conference Abstract:
I show that a simple sticky price model based on Rotemberg (1982) is consistent with a variety of facts concerning the correlation of prices, hours and output. In particular, I show that it is consistent with a negative correlation between the detrended levels of output and prices when the Beveridge-Nelson method is used to detrend both the price and output data. Such a correlation, i.e.,a negative correlation between the predictable movements in output and the predictable movements in prices is present (and very strong) in U.S. data. Consistent with the model, this correlation is stronger than correlations between prices and hours of work. I also study the size of the predictable price movements that are associated with predictable output movements as well as the degree to which there are predictable movements in monetary aggregates associated with predictable movements in output. These facts are used to shed light on the degree to which the Federal Reserve has pursued a policy designed to stabilize expected inflation.
关键词: Monetary policy, Output, Inflation, Federal Reserve, and Prices 学科: E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation, E24 - Macroeconomics : Consumption, saving, production, employment, and investment - Employment ; Unemployment ; Wages ; Intergenerational income distribution ; Aggregate human capital, E23 - Macroeconomics : Consumption, saving, production, employment, and investment - Production, and E50 - Monetary policy, central banking, and the supply of money and credit - General
Creator: Prati, Alessandro, 1961- Series: Monetary theory and financial intermediation Abstract:
The data and press commentaries studied in this paper call for a reinterpretation of the French inflationary crisis and its stabilization in 1926. In contrast with T. J. Sargent's (1984) interpretation, there is evidence that the budgetary situation was well in hand and that only fear of a capital levy made the public unwilling to buy government bonds. As a result, the government had to repay the bonds coming to maturity with monetary financing. Only when Poincare introduced a bill to shift the tax burden off bondholders did the demand for government bonds recover and inflation stop.
学科: E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation, E65 - Macroeconomic policy, macroeconomic aspects of public finance, and general outlook - Studies of particular policy episodes, E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy, and N24 - Economic History: Financial Markets and Institutions: Europe: 1913-
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