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.
Keyword: Debt securities, Credit, Consumption, Households, and Credit contracts Subject (JEL): 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
Creator: Miller, Preston J. and Todd, Richard M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 494 Abstract:
This paper investigates the macroeconomic and welfare effects of a particular public finance decision. That decision was to use debt rather than current taxation to finance deposit insurance payments related to the savings and loan debacle. We find that this decision could have significantly raised real interest rates and affected welfare. The analysis is conducted in a dynamic, open-economy, monetary general equilibrium model in which parameters are set based on empirical observations.
Keyword: S & L, Public finance, Real interest rates, Welfare, Deposit insurance, Taxation, Government debt, and Savings and loan Subject (JEL): G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages and H63 - National Debt; Debt Management; Sovereign Debt
Creator: Miller, Preston J. and Todd, Richard M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 481 Abstract:
This paper investigates the effects of changes in a country's monetary policies on its economy and the welfare of its citizens and those of other countries. Each country is populated by two-period lived overlapping agents who reside in either a home service sector or a world-traded good sector. Policy effects are transmitted through changes in the real interest rate, relative prices, and price levels. Welfare effects are sometimes dominated by relative price movements and can thus be opposite of those found in one-good models. Simulation of dynamic paths also reveals that welfare effects for some types of agents reverse between those born in immediate post-shock periods and those born later.
Keyword: Real interest rates, Relative prices, Prices, Exchange rates, and Monetary policy Subject (JEL): F31 - Foreign Exchange, E52 - Monetary Policy, and E31 - Price Level; Inflation; Deflation
Creator: Christiano, Lawrence J. and Eichenbaum, Martin S. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 478 Keyword: MATLAB, Business cycles, Monetary policy, Mathematical computations, Appendix, Computations, and Liquidity Subject (JEL): E52 - Monetary Policy, Y10 - Data: Tables and Charts, and E32 - Business Fluctuations; Cycles
Creator: Auerbach, Kay J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 047 Keyword: International banking and Bank regulation Subject (JEL): G28 - Financial Institutions and Services: Government Policy and Regulation and F00 - International Economics: General
Creator: Fernandez, Raquel, 1959- and Rogerson, Richard Donald Series: Law and economics of federalism Abstract:
This paper examines the effect of different education financing systems on the level and distribution of resources devoted to public education. We focus on California, which in the 1970's was transformed from a system of mixed local and state financing to one of effectively pure state finance and subsequently saw its funding of public education fall between ten and fifteen percent relative to the rest of the US. We show that a simple political economy model of public finance can account for the bulk of this drop. We find that while the distribution of spending became more equal, this was mainly at the cost of a large reduction in spending in the wealthier communities with little increase for the poorer districts. Our model implies that there is no simple trade-off between equity and resources; we show that if California had moved to the opposite extreme and abolished state aid altogether, funding for public education would also have dropped by almost ten percent.
Keyword: Education finance reform, Public finance, California, State government policy, and Human capital Subject (JEL): I22 - Educational Finance; Financial Aid, H42 - Publicly Provided Private Goods, and I28 - Education: Government Policy
Creator: Kiyotaki, Nobuhiro and Wright, Randall D. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 464 Abstract:
The classical and early neoclassical economists knew that the essential function of money was its role as a medium of exchange. Recently, this idea has been formalized using search-theoretic noncooperative equilibrium models of the exchange process. The goal of this paper is to use a simple model of this class to analyze four substantive issues in monetary economics: the interaction between specialization and exchange, dual fiat currency regimes, the welfare improving role of money, and the susceptibility of monetary economies to extrinsic uncertainty.
Keyword: Fiat money, Monetary economics, Fiat currency, Exchange, and Money Subject (JEL): D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness and E00 - Macroeconomics and Monetary Economics: General
Creator: Greenwood, Jeremy, 1953- and Jovanovic, Boyan, 1951- Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 446 Abstract:
A paradigm is presented where both the extent of financial intermediation and the rate of economic growth are endogenously determined. Financial intermediation promotes growth because it allows a higher rate of return to be earned on capital, and growth in turn provides the means to implement costly financial structures. Thus, financial intermediation and economic growth are inextricably linked in accord with the Goldsmith-McKinnon-Shaw view on economic development. The model also generates a development cycle reminiscent of the Kuznets hypothesis. In particular, in the transition from a primitive slow-growing economy to a developed fast-growing one, a nation passes through a stage where the distribution of wealth across the rich and poor widens.
Keyword: Rate of return, Financial intermediation, Income gap, Income distribution, Kuznets curve, and Growth rate Subject (JEL): G00 - Financial Economics: General and O11 - Macroeconomic Analyses of Economic Development