Creator: Chari, V. V., Christiano, Lawrence J., and Eichenbaum, Martin S. Series: Finance, fluctuations, and development Abstract:
Different monetary aggregates covary very differently with short term nominal interest rates. Broad monetary aggregates like Ml and the monetary base covary positively with current and future values of short term interest rates. In contrast, the nonborrowed reserves of banks covary negatively with current and future interest rates. Observations like this 'sign switch' lie at the core of recent debates about the effects of monetary policy actions on short term interest rates. This paper develops a general equilibrium monetary business cycle model which is consistent with these facts. Our basic explanation of the 'sign switch' is that movements in nonborrowed reserves are dominated by exogenous shocks to monetary policy, while movements in the base and Ml are dominated by endogenous responses to non-policy shocks.
Keyword: Monetary policy, Interest, Money, Shocks, Inside money, and Interest rates Subject (JEL): E43 - Money and interest rates - Determination of interest rates ; Term structure of interest rates and E51 - Monetary policy, central banking, and the supply of money and credit - Money supply ; Credit ; Money multipliers
Creator: Nevin, Edward. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 9 Description:
The 1972 version of WP9 was published as part of the Ninth District Economic Series.
Keyword: Policy making, Banking, and Regionalism Subject (JEL): G21 - Financial institutions and services - Banks ; Other depository institutions ; Micro finance institutions ; Mortgages and R58 - Regional government analysis - Regional development policy
Creator: Smith, Bruce D., d. 2002. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 234 Abstract:
Current approaches to monetary theory and policy owe much to the "quantity theory of money." However, recent theoretical developments suggest that the manner in which money is introduced is more important, even for price level movements, than the quantity of money. Colonial American experience provides a laboratory for discriminating between these views. It is shown here that the nature of backing, rather than the quantity of money, determined its value. Large secular inflations were ended by changing the nature of backing despite the continuance of large note issues (and despite the absence of a metallic standard). Extremely large note issues and note withdrawals are shown not to have produced inflation (currency depreciation) or deflation (currency appreciation).
Keyword: Quantity theory, Colonial America, Fiat money, and Currency Subject (JEL): E42 - Money and interest rates - Monetary systems ; Standards ; Regimes ; Government and the monetary system ; Payment systems, E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy, and N11 - Macroeconomics and monetary economics ; Growth and fluctuations - United States ; Canada : Pre-1913
Creator: Todd, Richard M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 355 Abstract:
Forecasts are routinely revised, and these revisions are often the subject of informal analysis and discussion. This paper argues 1) that forecast revisions are analyzed because they help forecasters and forecast users to evaluate forecasts and forecasting procedures, and 2) that these analyses can be sharpened by using the forecasting model to systematically express its forecast revision as the sum of components identified with specific data revisions and forecast errors. An algorithm for this purpose is explained and illustrated.
Keyword: Forecasting, Forecast revisions, Innovation, and Data revisions Subject (JEL): E17 - General aggregative models - Forecasting and simulation
Creator: Uhlig, Harald, 1961- Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 342 Abstract:
[Please note that the following Greek lettering is improperly transcribed.] If [0,1] is a measure space of agents and X---- a collection of pairwise uncorrelated random variables with common finite mean U and variance a , one would like to establish a law of large numbers () Xdl = U. In this paper we propose to interpret () as a Pettis integral. Using the corresponding Riemann-type version of this integral, we establish (*) and interpret it as an L2-law of large numbers. Intuitively, the main idea is to integrate before drawing an W, thus avoiding well-know measurability problems. We discuss distributional properties of i.i.d. random shocks across the population. We given examples for the economic interpretability of our definition. Finally, we establish a vector-valued version of the law of large numbers for economies.
Keyword: Random variable, Khinchines law of large numbers, L2 law of large numbers, Riemann integral, Pettis integral, and Large numbers Subject (JEL): C10 - Econometric and statistical methods : General - General
Creator: Roberds, William. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 298 Abstract:
The consequences of a straightforward monetary targeting scheme are examined for a simple dynamic macro model. The notion of "targeting" used below is the strategic one introduced by Rogoff (1985). Numerical simulations are used to demonstrate that for the model under consideration, monetary targeting is likely to lead to a deterioration of policy performance. These examples cast doubt upon the general efficacy of simple targeting schemes in dynamic rational expectations models.
Keyword: Monetary policy, Macroeconomic model, Monetary targeting, and Rational expectations Subject (JEL): C61 - Mathematical methods and programming - Optimization techniques ; Programming models ; Dynamic analysis and E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy
Creator: Kydland, Finn E. and Prescott, Edward C. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 267 Abstract:
The neoclassical growth model studied in Kydland and Prescott  is modified to permit the capital utilization rate to vary. The effect of this modification is to increase the amplitude of the aggregate fluctuations predicted by theory as the equilibrium response to technological shocks. If following Solow , the changes in output not accounted for by changes in the labor and tangible capital inputs are interpreted as being the technology shocks, the statistical properties of the fluctuations in the post-war United States economy are close in magintude and nature to those predicted by theory.
Keyword: Production, Labor, Business cycle , and Work week Subject (JEL): E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles and D50 - General equilibrium and disequilibrium - General