Creator: Wallace, Neil. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 281 Keyword: Monetarism, Currency provision, Interest, and Monetary economics Subject (JEL): E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy and E40 - Money and interest rates - General
Creator: Lacker, Jeffrey Malcolm. Series: Foundations of policy toward electronic money Abstract:
Briefly reviews the potential consequences of electronic money for the management of the government's balance sheet through open market operations and for the regulations governing the public and private issue of payment instruments.
Keyword: Monetary policy, Electronic money, and Payment instruments Subject (JEL): E58 - Monetary policy, central banking, and the supply of money and credit - Central banks and their policies, E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy, and E42 - Money and interest rates - Monetary systems ; Standards ; Regimes ; Government and the monetary system ; Payment systems
Creator: Bryant, John B. and Supel, Thomas M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 116 Abstract:
It is commonly asserted that with excess plant capacity, expansive policy stimulates output and lowers unemployment without substantially boosting inflation, while at full capacity most of the impact is on inflation. This assertion is critically examined. First, two common definitions of capacity--engineering and economic—are examined and found to be nebulous. The concepts of supply and demand are older, but better. Full capacity is reinterpreted as points where the supply curve is steep and excess capacity as points where it is fairly flat. Then the "Keynesian" model in which stimulative policy shifts only the demand curve is compared to the "classical" model where stimulative policy shifts both demand and supply curves. For the former model the assertion on capacity utilization is correct, while in the latter it is not. Empirical tests are performed to determine whether measured capacity utilization is useful for predicting inflation. The tests are ambiguous, but certainly do not strongly favor capacity utilization.
Keyword: Aggregate demand, Aggregate economy, Engineering capacity, and Economic capacity Subject (JEL): E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation and E12 - General aggregative models - Keynes ; Keynesian ; Post-Keynesian
Creator: Bordo, Michael D., Rappoport, Peter., and Schwartz, Anna J. (Anna Jacobson), 1915-2012. Series: Monetary theory and financial intermediation Abstract:
In this paper we examine the evidence for two competing views of how monetary and financial disturbances influenced the real economy during the national banking era, 1880-1914. According to the monetarist view, monetary disturbances affected the real economy through changes on the liability side of the banking system's balance sheet independent of the composition of bank portfolios. According to the credit rationing view, equilibrium credit rationing in a world of asymmetric information can explain short-run fluctuations in real output. Using structural VARs we incorporate monetary variables in credit models and credit variables in monetarist models, with inconclusive results. To resolve this ambiguity, we invoke the institutional features of the national banking era. Most of the variation in bank loans is accounted for by loans secured by stock, which in turn reflect volatility in the stock market. When account is taken of the stock market, the influence of credit in the VAR model is greatly reduced, while the influence of money remains robust. The breakdown of the composition of bank loans into stock market loans (traded in open asset markets) and other business loans (a possible setting for credit rationing) reveals that other business loans remained remarkably stable over the business cycle.
Subject (JEL): N21 - Economic History: Financial Markets and Institutions: U.S.; Canada: Pre-1913 and N11 - Macroeconomics and monetary economics ; Growth and fluctuations - United States ; Canada : Pre-1913
Creator: Weinberg, John A. Series: Foundations of policy toward electronic money Abstract:
As a network, a payment system is likely to exhibit network externalities and perhaps some public good characteristics. Such properties may be more pronounced in an electronic payment system, because of its greater reliance on communication infrastructures with high fixed and low variable costs, for instance. This paper presents the basic economics of network externalities and reviews some basic principles regarding public goods. It then asks what these phenomena imply about the role of the Federal Reserve in emerging payment systems. The general conclusion is that there is reason to be skeptical that network externalities and public goods will be significant sources of market failure in electronic payment systems. These phenomena, by themselves, give rise to no particular, essential central bank role in these markets.
Keyword: Network industries, Public goods, Electronic payment systems, Network externalities, Network services, Communication systems, Central banks, Payment systems, and Network markets Subject (JEL): E58 - Monetary policy, central banking, and the supply of money and credit - Central banks and their policies and E42 - Money and interest rates - Monetary systems ; Standards ; Regimes ; Government and the monetary system ; Payment systems
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.
Keyword: Value of money, Monetary injections, Sargent-Wallace theory of money, and Quantity theory of money Subject (JEL): 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
Creator: Manuelli, Rodolfo E. and Wallace, Neil. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 252 Abstract:
We study an overlapping generations model which contains a capital good that resembles actual gold. This capital good can he stored without physically depreciating and can, by using other resources, be converted back and forth between gold jewelry which yields utility directly and raw gold which does not. Under the assumption that the three utility-yielding objects—first and second period consumption and jewelry—are gross substitutes, stationary equilibria are shown to exist and are characterized; for some parameter values, there are inefficient equilibria, while for others there are efficient equilibria. Both types can be interpreted as commodity money equilibria.
Cover note : "An earlier version of this paper was presented at a seminar at MIT."
Keyword: Capital goods, Commodity money system, Commodities, Commodity prices, Commodity money equilibrium, and Overlapping generations model Subject (JEL): E42 - Money and interest rates - Monetary systems ; Standards ; Regimes ; Government and the monetary system ; Payment systems and D51 - General equilibrium and disequilibrium - Exchange and production economies
Creator: Aiyagari, S. Rao., Wallace, Neil., and Wright, Randall. Series: Lucas expectations anniversary conference Abstract:
A pairwise random meeting model with money is used to study the nominal yield on pure-discount, default-free securities that are issued by the government. There is one steady state with matured securities at par and, for some parameters, another with them at a discount. In the former, exogenous rejection of unmatured securities by the government is necessary and sufficient for such a steady state to display a positive nominal yield on unmatured securities. In the latter, the post-maturity discount on securities induces a deeper pre-maturity discount even if there is no exogenous rejection of unmatured securities.
Keyword: Maturity, Government securities, and Interest rates Subject (JEL): E43 - Money and interest rates - Determination of interest rates ; Term structure of interest rates and E02 - Macroeconomics and monetary economics - General - Institutions and the macroeconomy