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Creator: Mulligan, Casey B. Series: Great depressions of the twentieth century Abstract: I prove some theorems for competitive equilibria in the presence of distortionary taxes and other restraints of trade, and use those theorems to motivate an algorithm for (exactly) computing and empirically evaluating competitive equilibria in dynamic economies. Although its economics is relatively sophisticated, the algorithm is so computationally economical that it can be implemented with a few lines in a spreadsheet. Although a competitive equilibrium models interactions between all sectors, all consumer types, and all time periods, I show how my algorithm permits separate empirical evaluation of these pieces of the model and hence is practical even when very little data is available. For similar reasons, these evaluations are not particularly sensitive to how data is partitioned into "trends" and "cycles." I then compute a real business cycle model with distortionary taxes that fits aggregate U.S. time series for the period 192950 and conclude that, if it is to explain aggregate behavior during the period, government policy must have heavily taxed labor income during the Great Depression and lightly taxed it during the war. In other words, the challenge for the competitive equilibrium approach is not so much why output might change over time, but why the marginal product of labor and the marginal value of leisure diverged so much and why that wedge persisted so long. In this sense, explaining aggregate behavior during the period has been reduced to a public finance question  were actual government policies distorting behavior in the same direction and magnitude as government policies in the model?
Parola chiave: Depressions, Taxes, World War 2, and Competitive equilibrium models Soggetto: H30  Fiscal Policies and Behavior of Economic Agents: General, E32  Business Fluctuations; Cycles, and C68  Computable General Equilibrium Models 
Creator: Prescott, Edward C. and RíosRull, JoséVíctor. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 329 Abstract: ArrowDebreu competitive equilibrium analysis is extended to environments with information sets differing in space as well as in time and with people moving between locations. Equilibrium is shown to exist and to be optimal and the equilibrium price system is characterized. Such environments include many of those studied in the equilibrium search literature.
Descrizione: Replaced by WP 449.
Parola chiave: Production, Search environment, Classical approach, Growth, and Competitive general equilibrium Soggetto: D83  Information, knowledge, and uncertainty  Search ; Learning ; Information and knowledge ; Communication ; Belief and O21  Development planning and policy  Planning models ; Planning policy 
Creator: Eichenbaum, Martin S. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 148 Abstract: A critical roadblock to modelling inventories of finished goods has been the claim that production and inventory decisions of a perfectly competitive firm are determined independently of each other. A basic goal of this study is to specify fundamental preferences of economic agents, technologies, constraints and market structures that are. in a rough way, capable of generating patterns of serial correlation and cross correlation between inventories and employment of factors of production that are consistent with those observed in the data. The claim is made that the time series for inventories, output and employment can be interpreted as emerging from a well specified dynamic, stochastic competitive equilibrium in which economic agents are assumed to form rational expectations about variables not included in their information sets. Inventories and employment will not be related in a direct way if and only if the price elasticity of demand for output is equal to infinity.
Descrizione: Working Paper 148 has a 17page handout. To access, please click link for 19800200fedmwp148 in the Relationhas part field.
Parola chiave: Time series analysis and Competitive equilibrium Soggetto: C32  Multiple or simultaneous equation models  Timeseries models ; Dynamic quantile regressions and D51  General equilibrium and disequilibrium  Exchange and production economies 
Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 149 Abstract: Game theory addresses a problem which is central to economics. Yet, according to the folklore of economics, game theory has failed. This paper argues that this is an incorrect interpretation of the game theory literature. When faced with a wellposed problem, game theory provides a solution. Procedures for facing game theory with wellposed problems are suggested, and examples of economic applications provided. The applications are Samuelson's fiat money model, Phelps' capital overaccumulation problem, multiple rational expectations equilibria, and a bargaining problem.
Parola chiave: Competitive equilibrium, MinimaxNash, and Nash equilibrium Soggetto: C72  Game theory and bargaining theory  Noncooperative games 
Creator: Bryant, John B. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 149 Abstract: Game theory addresses a problem which is central to economics. Yet, according to the folklore of economics, game theory has failed. This paper argues that this is an incorrect interpretation of the game theory literature. When faced with a wellposed problem, game theory provides a solution. Procedures for facing game theory with wellposed problems are suggested, and examples of economic applications provided. The applications are Samuelson's fiat money model, Phelps' capital overaccumulation problem, multiple rational expectations equilibria, and a bargaining problem.
Parola chiave: Competitive equilibrium, MinimaxNash, and Nash equilibrium Soggetto: C72  Game theory and bargaining theory  Noncooperative games 
Creator: Eichenbaum, Martin S. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 148 Descrizione: This document is a 17page handout that accompanies WP 148, which can be accessed by clicking on the file 19800500fedmwp148 in the Relationrequires field.
Parola chiave: Competitive equilibrium and Time series analysis Soggetto: D51  General equilibrium and disequilibrium  Exchange and production economies and C32  Multiple or simultaneous equation models  Timeseries models ; Dynamic quantile regressions 
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 pureexchange 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 countryspecific 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.
Parola chiave: Risk sharing, Nontraded goods, Investment, Government deficits, Competitive equilibrium, and Productivity Soggetto: E32  Prices, business fluctuations, and cycles  Business fluctuations ; Cycles, F21  International Investment; Longterm Capital Movements, and F30  International finance  General 
Creator: Jackson, Matthew O. and Peck, James. Series: Finance, fluctuations, and development Abstract: We examine price formation in a simple static model with asymmetric information, a countable number of risk neutral traders and without noise traders. Prices can exhibit excess volatility (the variance of prices exceeds the variance of dividends), even in such a simple model. More generally, we show that for an open set of parameter values no equilibrium has prices which turn out to equal the value of dividends state by state, while for another open set of parameter values there exist equilibria such that equilibrium prices equal the value of dividends state by state. When information collection is endogenous and costly, expected prices exhibit a "Vshape" as a function of the cost of information: They are maximized when information is either costless so that everyone acquires it, or else is so costly that no one chooses to acquire it. Prices are depressed if information is cheap enough so that some agents become informed, while others do not. If the model is altered so that information is useful in making productive decisions, then the Vshape is altered, reducing the attractiveness of prohibitively high costs.
Soggetto: G14  General financial markets  Information and market efficiency ; Event studies, D50  General equilibrium and disequilibrium  General, and C70  Game theory and bargaining theory  General 

Creator: Prescott, Edward C. and RíosRull, JoséVíctor. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 329 Abstract: ArrowDebreu competitive equilibrium analysis is extended to environments with information sets differing in space as well as in time and with people moving between locations. Equilibrium is shown to exist and to be optimal and the equilibrium price system is characterized. Such environments include many of those studied in the equilibrium search literature.
Descrizione: Replaced by WP 449.
Parola chiave: Production, Search environment, Classical approach, Growth , and Competitive general equilibrium Soggetto: D83  Information, knowledge, and uncertainty  Search ; Learning ; Information and knowledge ; Communication ; Belief and O21  Development planning and policy  Planning models ; Planning policy