Creator: Smith, Bruce D. (Bruce David), 1954-2002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 228 Abstract:
"Summary of Recommendations: . . . Repeal present control by the System over interest rates that member banks may pay on time deposits and present prohibition of interest payments by member banks on demand deposits." Milton Friedman (1960, p. 100) "I conclude that the over-all monetary effects of ceiling regulations are small and easy to neutralize by traditional monetary controls. The allocative and distributive effects are, however, unfortunate. The root of the policy was an exaggerated and largely unnecessary concern for the technical solvency of savings and loan associations." James Tobin (1970, p. 5) The regulation of deposit interest rates has received little support from economists. The same is true for the original rationale for such regulation: that bank competition for deposits generates inherent "instability" in the banking system. This paper develops an "adverse selection" model of banking in which this rationale is correct. Moreover, in this model instability in the banking system can arise despite the presence of a "lender of last resort," and despite the absence of any need for "deposit insurance." However, in the world described, the regulation of deposit interest rates is shown to be an appropriate response to "instability" in the banking system. Finally, it is argued that "adverse selection" models of deposit interest rate determination can confront a number of observed phenomena that are not readily explained in other contexts.
Stichwort: Banking Act, Banking panics, Risk, Instability, Bank regulation, Unregulated banks, Banking Act of 1935, and Banking Act of 1933 Fach: G11 - Portfolio Choice; Investment Decisions, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, D82 - Asymmetric and Private Information; Mechanism Design, and G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Creator: Faust, Jon. Series: Conference on economics and politics Abstract:
The Federal Reserve Act erected a unique structure of government decisionmaking, independent with elaborate rules balancing internal power. Historical evidence suggests that this outcome was a response to public conflict over inflation's redistributive powers. This paper documents and formalizes this argument: in the face of conflict over redistributive inflation, policy by majority can lead to policy that is worse, even fo the majority, than obvious alternatives. The bargaining solution of an independent board with properly balanced interests leads to a better outcome. Technically, this paper extends earlier work in making policy preferences endogenous and in extending the notion of equilibirum policy to such a world. Substantively, this work provides a simple grounding of policy preferences-largely missing heretofore-linking game theoretic models of policy to historical evidence about the formation of an independent monetary authority.
Fach: E58 - Monetary policy, central banking, and the supply of money and credit - Central banks and their policies, N12 - Macroeconomics and monetary economics ; Growth and fluctuations - United States ; Canada : 1913-, and E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy
Creator: Nevin, Edward. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 9 Beschreibung:
The 1972 version of WP9 was published as part of the Ninth District Economic Series.
Stichwort: Banking, Regionalism, and Policy making Fach: G21 - Financial institutions and services - Banks ; Other depository institutions ; Micro finance institutions ; Mortgages and R58 - Regional government analysis - Regional development policy
Creator: Anderson, Paul A. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 82 Abstract:
This paper puts forward a method of policy simulation with an existing macroeconometric model under the maintained assumption that individuals form their expectations rationally. This new simulation technique grows out of Lucas' criticism that standard econometric policy evaluation permits policy rules to change but doesn't allow expectations mechanisms to respond as economic theory predicts they will. This technique is applied to versions of the St. Louis Federal Reserve model and the FRB-MIT-Penn model to simulate the effects of different constant money growth policies. I shall briefly summarize the current practice of policy evaluation and the Lucas critique in the first section. The second section includes an explanation of the method I propose. The third section includes the two illustrative applications. In the conclusion, I cannot resist the temptation to offer some opinions about the use and usefulness of econometric models.
Cover note: "To be presented at the summer meetings of the Econometric Society in Ottawa on June 22, 1977."
Stichwort: Macroeconometric models, Policy, and Rational expectations theory Fach: E60 - Macroeconomic policy, macroeconomic aspects of public finance, and general outlook - General
Creator: Braun, R. Anton. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 506 Abstract:
This paper investigates the macroeconomic effects of cyclical fluctuations in marginal tax rates. It finds that systematically including tax variables in a standard real business cycle model substantially improves the model's ability to reproduce basic facts about postwar U.S. business cycle fluctuations. In particular, modeling fluctuations in personal and corporate income tax rates increases the model's predicted relative variability of hours and decreases its predicted correlation between hours and average productivity. Fluctuations in tax rates produce large substitution effects that alter the leisure/labor supply decision.
Stichwort: Tax rates, Corporate tax , Income tax, Real business cycle model, Taxation, Productivity, Taxes, Business cycle, and Tax Fach: H24 - Taxation, subsidies and revenue - Personal income and other nonbusiness taxes and subsidies, H25 - Taxation, subsidies and revenue - Business taxes and subsidies, and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles
Creator: Anderson, Paul A. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 61 Abstract:
This paper puts forward a method for simulating an existing macroeconometric model while maintaining the additional assumption that individuals form their expectations rationally. This simulation technique is a first response to Lucas' criticism that standard econometric policy evaluation allows policy rules to change but doesn't allow expectations rules to change as economic theory predicts they will. The technique is applied to a version of the St. Louis Federal Reserve Model with interesting results. The rational expectations version of the St. Louis Model exhibits the same neutrality with respect to certain policy rules as small, analytic rational expectations models considered by Lucas, Sargent, and Wallace.
Stichwort: Rational expectations theory, Forecasting, and Simulation Fach: C53 - Econometric modeling - Forecasting and other model applications