Creator: Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 251 Abstract:
Different conclusions about the effects of open market operations are reached even among economists using full employment and rational expectations models. I show that these can be attributed to different assumptions regarding (i) the concept of the deficit that is held fixed in the face of an open market operation, (ii) diversity among agents, and (iii) the features generating money demand. With regard to (iii), I argue that plausible ways of explaining the holding of low-return money preclude the kind of perfect credit markets needed to obtain Ricardian equivalence.
This paper was presented for the International Seminar in Public Economics, held in February 1984 at the University of California at Santa Cruz.
Stichwort: Money demand, Ricardian equivalency, Open market purchases, and Deficit Fach: E41 - Demand for Money and E52 - Monetary Policy
Creator: Holmes, Thomas J. and Ohanian, Lee E. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 501 Abstract:
As part of compensation, municipal employees typically receive promises of future benefits. Motivated by the recent bankruptcy of Detroit, we develop a model of the equilibrium size of a city and use it to analyze how pay-with-promises schemes interact with city growth. The paper examines the circumstances under which a death spiral arises, where cutbacks of city services and increases in taxes lead to an exodus of residents, compounding financial distress. The model is put to work to analyze issues such as the welfare effects of having cities absorb pension risk and how unions affect the likelihood of a death spiral.
Stichwort: Defined benefit pension plans, Death spiral, City growth, Pay with promises, Detroit, and Retiree health benefits Fach: H20 - Taxation, Subsidies, and Revenue: General, H75 - State and Local Government: Health; Education; Welfare; Public Pensions, R51 - Finance in Urban and Rural Economies, and R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics