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: Backus, David and Kehoe, Patrick J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 348 Abstract:
We derive the empirical implications of a popular class of international macroeconomic models. The real economy is a stochastic exchange model with complete markets. A standard result is that cross-country risk sharing implies perfect correlation between consumption paths across countries. With mild restrictions on the endowment process ii also implies a positive correlation between net exports and output in every country. We introduce money using cash-in-advance constraints and show that the implications for real variables carry over into the monetary economy. These dichotomy and neutrality propositions generalize those in the literature to stochastic environments with heterogeneous agents, and do not require the cash-in-advance constraint to bind in every state. They imply that any correlation between the nominal exchange rate and the balance of trade can be made consistent with the theory.
Stichwort: Government finance, Risk-sharing, Exchange rates, Cash-in-advance, and Monetary policy Fach: F30 - International Finance: General, E32 - Business Fluctuations; Cycles, and D46 - Value Theory
Creator: Altug, Sumru Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 286 Abstract:
This paper characterizes the behavior of investment expenditures, optimal capital stocks, and real interest rates in the time-to-build model of investment. These results are used to show that the delivery lag model of investment fails to account for time lags in investment when constructing the cost of capital variable and hence, misspecifies the effects of interest rates on investment expenditures. Second, this paper derives equilibrium pricing relationships involving the prices of existing capital and uses these relationships to obtain simple tests of the underlying investment technology. Despite the widespread use of 'q' in the empirical investment literature, it is shown that the relationship between current investment and an appropriately defined measure of Tobin's 'q' contains no such testable implications. Finally, it is shown that the practice of using stock market data to measure the price of existing capital is invalid when time lags exist in the investment process.
Stichwort: Capital stocks, Equilibrium pricing, Time lag, and Lag Fach: E22 - Investment; Capital; Intangible Capital; Capacity
Creator: Nelson, Clarence W. (Clarence Walford), 1924- Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 000 Beschreibung:
This paper was published with no issue number.
Stichwort: Logging, Black Hills, Lumber, and 9th District Fach: Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth, Q23 - Renewable Resources and Conservation: Forestry, and Q21 - Renewable Resources and Conservation: Demand and Supply; Prices
Creator: Boyd, John H., Daley, Lane A., 1953-, and Runkle, David Edward Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 515 Abstract:
This paper examines the seasonal pattern of accruals for loan-loss provisions and chargeoffs chosen by bank managers. Using the existing literature on intra-year discretionary accruals, knowledge of the incentive systems used to evaluate bank managers' performance, and various regulatory characteristics, we predict that accruals for provisions and chargeoffs will cluster in the fourth quarter of each year. We examine quarterly data for 105 large bank holding companies from the first quarter of 1980 through the fourth quarter of 1990. Our results indicate that: (1) provisions and chargeoffs are clustered in the fourth quarter, (2) this clustering is not related to the level of business activity of the banks, (3) the proximity of a bank's actual capital to its regulatory capital requirement does not affect this clustering, and (4) current provisions are affected both by current chargeoffs and by expectations about future chargeoffs. To examine whether the systematic characteristics of these loan-loss provision and chargeoff decisions are understood by users, we also estimate a quarterly equity valuation model in which quarterly provisions should be differentially weighted to reflect their seasonal characteristics. We find strong evidence to indicate that equity prices behave as if the market participants take these seasonal properties into account.
Stichwort: Loan-loss provision, Charge-off, Seasonality, Loan losses, Bank lending, Loans, and Banks Fach: G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages and G14 - Information and Market Efficiency; Event Studies; Insider Trading
Creator: Smith, Bruce D. (Bruce David), 1954-2002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 406 Stichwort: Inflation, Prices, Central banking, Money, Monetary policy, and Quantity theory of money Fach: E52 - Monetary Policy and E31 - Price Level; Inflation; Deflation
Creator: Green, Edward J. and Oh, Soo-Nam Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 499 Abstract:
In this paper we explain why markets in noncontingent debt securities might be a stable form of market organization for intermediation to households. Efficient-contract allocation might be supported by these markets because households' relationships with their intermediaries do not exactly parallel the explicit form of the noncontingent contracts that they explicitly sign with one another. Also we show that the efficient-contract model can be distinguished from alternative models within the time-series framework that has been widely used to study households' consumption patterns.
Paper prepared for the 'Debt and Credit' Conference at the LSE.
Stichwort: Debt securities, Credit, Consumption, Households, and Credit contracts Fach: C22 - Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes, D11 - Consumer Economics: Theory, and G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages