Creator: Head, Allen, Liu, Lucy Qian, Menzio, Guido, and Wright, Randall D. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 690 Abstract:
Why do some sellers set nominal prices that apparently do not respond to changes in the aggregate price level? In many models, prices are sticky by assumption; here it is a result. We use search theory, with two consequences: prices are set in dollars, since money is the medium of exchange; and equilibrium implies a nondegenerate price distribution. When the money supply increases, some sellers may keep prices constant, earning less per unit but making it up on volume, so profit stays constant. The calibrated model matches price-change data well. But, in contrast with other sticky-price models, money is neutral.
关键词: Money, Sticky prices, Neutrality, and Monetary policy 学科: E31 - Price Level; Inflation; Deflation, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, and E52 - Monetary Policy
Creator: Siu, Henry E. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 390 Abstract:
I characterize time consistent equilibrium in an economy with price rigidity and an optimizing monetary authority operating under discretion. Firms have the option to increase their frequency of price change, at a cost, in response to higher inflation. Previous studies, which assume a constant degree of price rigidity across inflation regimes, find two time consistent equilibria—one with low inflation, the other with high inflation. In contrast, when price rigidity is endogenous, the high inflation equilibrium ceases to exist. Hence, time consistent equilibrium is unique. This result depends on two features of the analysis: (1) a plausible quantitative specification of the fixed cost of price change, and (2) the presence of an arbitrarily small cost of inflation that is independent of price rigidity.
关键词: Markov equilibrium, Expectation traps, Sticky prices, Multiple equilibria, Discretion, State dependent pricing, and Time consistency 学科: E31 - Price Level; Inflation; Deflation, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, and E52 - Monetary Policy
Creator: Buera, Francisco and Nicolini, Juan Pablo Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 580 Abstract:
In this chapter, we review the monetary and fiscal history of Argentina for the period 1960–2017, a time during which the country suffered several balance of payments crises, three periods of hyperinflation, two defaults on government debt, and three banking crises. All told, between 1969 and 1991, after several monetary reforms, thirteen zeros had been removed from its currency. We argue that all these events are the symptom of a recurrent problem: Argentina’s unsuccessful attempts to tame the fiscal deficit. An implication of our analysis is that the future economic evolution of Argentina depends greatly on its ability to develop institutions that guarantee that the government does not spend more than its genuine tax revenues over reasonable periods of time.
关键词: Macroeconomic history, Inflation, Fiscal and monetary interactions, Deficits, and Government budget constraint 学科: E31 - Price Level; Inflation; Deflation, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy, E50 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General, and N16 - Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: Latin America; Caribbean
Creator: Atkeson, Andrew, Chari, V. V., and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 394 Abstract:
The optimal choice of a monetary policy instrument depends on how tight and transparent the available instruments are and on whether policymakers can commit to future policies. Tightness is always desirable; transparency is only if policymakers cannot commit. Interest rates, which can be made endogenously tight, have a natural advantage over money growth and exchange rates, which cannot. As prices, interest and exchange rates are more transparent than money growth. All else equal, the best instrument is interest rates and the next-best, exchange rates. These findings are consistent with the observed instrument choices of developed and less-developed economies.
学科: E31 - Price Level; Inflation; Deflation, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, E52 - Monetary Policy, E30 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data), E51 - Money Supply; Credit; Money Multipliers, E40 - Money and Interest Rates: General, E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General, E58 - Central Banks and Their Policies, and E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination