Creator: Azariadis, Costas. and Smith, Bruce D., d. 2002. Series: Finance, fluctuations, and development Abstract:
We study a variant of the one-sector neoclassical growth model of Diamond in which capital investment must be credit financed, and an adverse selection problem appears in loan markets. The result is that the unfettered operation of credit markets leads to a one-dimensional indeterminacy of equilibrium. Many equilibria display economic fluctuations which do not vanish asymptotically; such equilibria are characterized by transitions between a Walrasian regime in which the adverse selection problem does not matter, and a regime of credit rationing in which it does. Moreover, for some configurations of parameters, all equilibria display such transitions for two reasons. One, the banking system imposes ceilings on credit when the economy expands and floors when it contracts because the quality of public information about the applicant pool of potential borrowers is negatively correlated with the demand for credit. Two, depositors believe that returns on bank deposits will be low (or high): these beliefs lead them to transfer savings out of (into) the banking system and into less (more) productive uses. The associated disintermediation (or its opposite) causes banks to contract (expand) credit. The result is a set of equilibrium interest rates on loans that validate depositors' original beliefs. We investigate the existence of perfect foresight equilibria displaying periodic (possibly asymmetric) cycles that consist of m periods of expansion followed by n periods of contraction, and propose an algorithm that detects all such cycles.
Stichwort: Equilibrium, Business cycles, Credit markets, and Interest rates Fach: O41 - One, Two, and Multisector Growth Models, E44 - Money and interest rates - Financial markets and the macroeconomy, E51 - Monetary policy, central banking, and the supply of money and credit - Money supply ; Credit ; Money multipliers, and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles
Creator: Bergoeing, Raphael., Hernando, Andrés., and Repetto, Andrea. Series: Advances in dynamic economics Abstract:
We estimate the effects of policy distortions on aggregate productivity. Based on a model of plant production and productivity uncertainty and heterogeneity, and using Chilean manufacturing data, we focus on the effect of taxation on the exit behavior of plants. We find that taxes do distort the liquidation decisions of firms, suggesting that policy distortions reduce the extent to which factors are reallocated towards the most productive plants. Our results have important consequences for growth and development, as policies that alter the measure of plants that operate in equilibrium change the short-run response of output to exogenous shocks and the long run level of aggregate TFP. In particular, we find that the amount of productivity lost due to excessive plant shutdowns are very large.
Stichwort: South America, Exit behavior of firms, Chile, Latin America, Taxation policy, and Total factor productivity Fach: H25 - Taxation, subsidies and revenue - Business taxes and subsidies and E23 - Macroeconomics : Consumption, saving, production, employment, and investment - Production
Creator: Caselli, Francesco, 1966- and Coleman, Wilbur John. Series: Productivity and the industrial revolution Abstract:
The process by which per capita income in the South converged to northern levels is intimately related to the structural transformation of the U.S. economy. We find that empirically most of the southern gains are attributable to the nation-wide convergence of agricultural wages to non-agricultural wages, and the faster rate of transition of the Southern labor force from agricultural to non-agricultural jobs. Similar results describe the Mid-West's catch up to the North-East (but not the relative experience of the West). To explain these observations, we construct a model in which the South (Mid-West) has a comparative advantage in producing unskilled-labor intensive agricultural goods. Thus, it starts with a disproportionate share of the unskilled labor force and lower per capita incomes. Over time, declining education/training costs induce an increasing proportion of the labor force to move out of the (unskilled) agricultural sector and into the (skilled) non-agricultural sector. The decline in the agricultural labor force leads to an increase in relative agricultural wages. Both effects benefit the South (Mid-West) disproportionately since it has more agricultural workers. The model successfully matches the quantitative features of the U.S. structural transformation and regional convergence, as well as several other stylized facts on U.S. economic growth in the last century. The model does not rely on frictions on factor mobility, since in our empirical work we find this channel to be less important than the compositional effects the model emphasizes.
Stichwort: Skill acquisition, Regional economies, Agricultural and non-agricultural workers, Structural transformation, and Regional convergence Fach: O14 - Economic development - Industrialization ; Manufacturing and service industries ; Choice of technology, O41 - One, Two, and Multisector Growth Models, and O18 - Economic development - Regional, urban, and rural analyses
Creator: Lin, Lizbie Gee-Sun. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Beschreibung:
Simultaneously published as part of the Ninth District Economic Information Series.
Stichwort: Students, Community colleges, Technical colleges, and Colleges and universities Fach: I22 - Education and research institutions - Educational finance, H52 - National government expenditures and related policies - Government expenditures and education, and R11 - General regional economics - Regional economic activity : Growth, development, and changes
Creator: Boyd, John H. and Smith, Bruce D., d. 2002. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 522 Abstract:
We consider a two country growth model with international capital markets. These markets fund capital investment in both countries, and operate subject to a costly state verification (CSV) problem. Investors in each country require some external finance, but also provide internal finance, which mitigates the CSV problem. When two identical (except for their initial capital stocks) economies are closed, they necessarily converge monotonically to the same steady state output level. Unrestricted international financial trade precludes otherwise identical economies from converging, and poor countries are necessarily net lenders to rich countries. Oscillation in real activity and international capital flows can occur.
Stichwort: CSV, International lending, Capital investment, Credit rationing, International capital markets, Credit, Costly state verification, Closed economy, and Open economy Fach: O16 - Economic development - Financial markets ; Saving and capital investment ; Corporate finance and governance and F34 - International finance - International lending and debt problems
Creator: Smith, Bruce D., d. 2002. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 245 Abstract:
Recent developments in monetary economics stress the nature of monetary injections, emphasizing that these have implications for the relationship between money and prices. In constrast, traditional approaches posit stable money demand functions that are independent of how money is injected. The former approach implies that certain proportionality relations between money and prices need not obtain. This permits the two approaches to be empirically distinguished, but only if an appropriate "experiment" is conducted. The colonial period is one such experiment. Colonial evidence suggests that the nature of injections is crucial to the effect on prices of changes in the money supply.
Stichwort: Value of money, Monetary injections, Sargent-Wallace theory of money, and Quantity theory of money Fach: E51 - Monetary policy, central banking, and the supply of money and credit - Money supply ; Credit ; Money multipliers and N11 - Macroeconomics and monetary economics ; Growth and fluctuations - United States ; Canada : Pre-1913