Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 99 Abstract:
This paper presents a monetarist model of the business cycle with price-setting firms. The model is estimated, and the point estimates used in simulations to illustrate the properties of the model. The real goods market is found to be stable, although subject to sharp changes in output. This model is consistent with rational expectations. Nevertheless, monetary policy can have a lasting impact, and the simulations show this to be the case. Fiscal policy too is found to influence the business cycle, but its short-run effects are substantially smaller than its impact effects. The possibility of an activist government policy in this model does not imply the efficiency of an activist policy.
Keyword: Inventory cycle, Rational expectations, Disequilibrium, and Real goods market Subject (JEL): E30 - Prices, business fluctuations, and cycles - General and G31 - Corporate finance and governance - Capital budgeting ; Fixed investment and inventory studies
Creator: Anderson, Paul A. and Supel, Thomas M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 39 Abstract:
This paper puts forward a method for improving the forecasting accuracy of an existing macroeconometric model without changing its policy response characteristics. The procedure is an extension and formalization of the practice of additive adjustments currently used by most forecasters. The method should be of special interest to forecasters who use models built by other investigators because it does not involve reestimation of the original model and uses only information routinely included in the documentation available to model users. The paper ends with a demonstration of the prediction improvement realized by application of this method to a version of the MIT-Penn-SSRC (MPS) model.
Keyword: Multiperiod forecasting, MIT-Penn-SSRC model, Prediction, and MIT-Penn-MPS model Subject (JEL): C52 - Econometric modeling - Model evaluation and selection and C53 - Econometric modeling - Forecasting and other model applications
Creator: Supel, Thomas M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 6 Abstract:
Previous work on discrete time portfolio selection models encompassed (a) transaction's costs, and (b) uncertainty about cash flows during the first (and only) period. This paper extends these models by considering uncertainty about asset yields in the second period and the optimal strategy for portfolio selection over a two-period horizon. Among the implications are i) the optimal initial portfolio is, in general, diversified and contains more short-term assets than the myopic investor's portfolio, and ii) the shape of the mean-variance locus ensures diversification for all (two-moment) types of investors, except certain forms of risk lovers. Other partial derivatives are investigated.
Working paper 6 is based largely on chapter 3 of Supel's University of Minnesota Ph.D. dissertation, "A two-period balance sheet model for banks."
Keyword: Diversification, Optimal strategy, Portfolio diversifying behavior, and Cash flow Subject (JEL): G11 - General financial markets - Portfolio choice ; Investment decisions and D81 - Information, knowledge, and uncertainty - Criteria for decision-making under risk and uncertainty
Creator: Miller, Preston J. and Todd, Richard M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) 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: Real interest rates, Deposit insurance, Public finance, Savings and loan, Taxation, Welfare, Government debt, and S & L Subject (JEL): H63 - National budget, deficit, and debt - Debt ; Debt management and G21 - Financial institutions and services - Banks ; Other depository institutions ; Micro finance institutions ; Mortgages
Creator: Miller, Preston J. and Todd, Richard M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) 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, Exchange rates, Prices, and Monetary policy Subject (JEL): E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy, F31 - International finance - Foreign exchange, and E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation
Creator: Miller, Preston J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 220 Description:
WP 220 was presented at The Economic Consequences of Government Deficits : an Economic Policy Conference, cosponsored by the Center for the Study of American Business and the Institute of Banking and Financial Markets at Washington University, St. Louis, Missouri, October 29-30, 1982.
Keyword: Tax policy, Federal debt, Deficit, Inflation, and Budget policy Subject (JEL): H63 - National budget, deficit, and debt - Debt ; Debt management, 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 H62 - National budget, deficit, and debt - Deficit ; Surplus
Creator: Boyd, John H., Daley, Lane A., 1953-, and Runkle, David Edward. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) 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.
Keyword: Bank lending, Loans, Charge-off, Loan losses, Banks, Loan-loss provision, and Seasonality Subject (JEL): G21 - Financial institutions and services - Banks ; Other depository institutions ; Micro finance institutions ; Mortgages and G14 - General financial markets - Information and market efficiency ; Event studies
Creator: Weber, Warren E. Description:
This spreadsheet contains data for Argentina, Brazil, Canada, Chile, France, Germany, Italy, Japan, Netherlands, Norway, Portugal, Spain, Sweden, UK, and US for the period 1810 – 1995. The data reported are for specie, M0, M2, prices, and output. The results in Rolnick-Weber, Journal of Political Economy (1997) are based on the data in this spreadsheet. For a description of how the data are constructed, see Rolnick and Weber, Staff Report 175 (1995) : https://www.minneapolisfed.org/research/staff-reports/inflation-money-and-output-under-alternative-monetary-standards.