Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 146 Abstract:
The determination of the mechanism for ordering strategies in a game theoretic conflict is the keystone of economic science, at least insofar as economics is to remain an outgrowth of that (otherwise relatively minor) school of English philosophy, Utilitarianism. A method for the solution of the general game is presented in this paper, and the implications for economic theorizing discussed.
Keyword: Games, Economic theory, Political economy, Multiple equilibria, and Minimax-Nash Subject (JEL): C72 - Game theory and bargaining theory - Noncooperative games and D50 - General equilibrium and disequilibrium - General
Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 177 Description:
"Nominal labor contracts replicate net of tax real contracts contingent on aggregate risk in the model presented. Perhaps this is a model of money." (title page note)
Keyword: Labor economics, Inflation tax, Income tax, and Wages Subject (JEL): C68 - Mathematical methods and programming - Computable general equilibrium models and J41 - Particular labor markets - Labor contracts
Creator: Prescott, Edward C. and Townsend, Robert M., 1948- Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 203 Abstract:
General competitive analysis is extended to cover a dynamic, pure-exchange economy with privately observed shocks to preferences. In the linear, infinite-dimensional space containing lotteries we establish the existence of optima, the existence of competitive equilibria, and that every competitive equilibrium is an optimum. An example illustrates that rationing and securities with contrived risk have an equilibrium interpretation.
Keyword: Pure exchange, Lotteries, and Competitive equilibria Subject (JEL): D82 - Information, knowledge, and uncertainty - Asymmetric and private information and D51 - General equilibrium and disequilibrium - Exchange and production economies
Creator: Wallace, Neil. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 24 Abstract:
In "Liquidity Preference as Behavior Towards Risk," Tobin suggests that risk aversion and expected utility maximization can provide a rigorous foundation for an equilibrium demand for money. In Tobin's model, money plays a risk reducing role in individual portfolios. This note considers whether a general equilibrium stochastic model can produce equilibrium yield distributions that allow money to play that role if money does not appear directly as an argument in the utility or production functions of the economy. The model examined, a stochastic production variant of Samuelson's model of overlapping generations, cannot produce such yield distributions.
Keyword: Monetary economy, Stochastic, and Risk aversion Subject (JEL): C51 - Econometric modeling - Model construction and estimation, G11 - General financial markets - Portfolio choice ; Investment decisions, and E41 - Money and interest rates - Demand for money
Creator: Todd, Richard M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 270 Keyword: Federal grain programs , Agriculture, Feed grains, Crops, Livestock, and Feed prices Subject (JEL): Q18 - Agriculture - Agricultural policy ; Food policy and H81 - Miscellaneous issues - Governmental loans, loan guarantees, credits, and grants
Creator: Aiyagari, S. Rao. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 319 Abstract:
We consider the existence of deterministically cycling steady state equilibria in a class of stationary overlapping generations models with sufficiently long (but, finite) lived agents. Preferences are of the discounted sum of utilities type with a fixed discount rate. Utility functions with large coefficients of relative risk aversion which generate strong income effects (relative to substitution effects) and backward bending offer curves are permitted. Lifetime endowment patterns are quite arbitrary. We show that if agents have a positive discount rate, then as agents1 lifespans get large, short period non-monetary cycles will disappear. Further, constant monetary steady states do not exist and therefore, neither do stationary monetary cycles of any period. We then consider the case where agents have a negative discount rate and show that there are robust examples in which constant monetary steady states as well as stationary monetary cycles (with undiminished amplitude) can occur no matter how long agents live.
Keyword: Longevity, Business cycles, Intertemporal choice, and Monetary theory Subject (JEL): D91 - Intertemporal choice and growth - Intertemporal consumer choice ; Life cycle models and saving and N10 - Macroeconomics and monetary economics ; Growth and fluctuations - General, international, or comparative
Creator: Sargent, Thomas J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 32 Keyword: Choices, Behavior, and Uncertainty Subject (JEL): D80 - Information, knowledge, and uncertainty - General
Creator: Backus, David. and Kehoe, Patrick J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 323 Abstract:
We examine deviations from trend of net exports and other components of GNP for the United States and attempt to build models consistent with their behavior. The most striking fact is that net exports have consistently been countercyclical. We show, first, that dynamic pure-exchange models can only produce a negative correlation between net exports and GNP if the variance of consumption exceeds that of output. In (he United Slates it does not, so this class of models cannot explain observed comovements between output and trade. We then examine government spending and nontraded goods as potential remedies, but show that their behavior is either inconsistent with the data or can be made consistent with any pattern of comovements. The most promising model introduces production and capital formation. Fluctuations are driven by country-specific productivity shocks, in which high productivity domestically leads to high domestic investment and a deficit in the balance of trade. This theory also receives support from the large negative covariance between net exports and investment in American data.
Keyword: Risk sharing, Non-traded goods, Investment, Government deficits, Competitive equilibrium, and Productivity Subject (JEL): E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles, F21 - International Investment; Long-term Capital Movements, and F30 - International finance - General
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