Resultados da Busca
Creator: Prescott, Edward C. and Wessel, Ryan Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 562 Abstract:
Businesses hold large quantities of cash reserves, which have average returns well below their investments in tangible capital. Businesses do this because these monetary assets provide services. One implication is that money services is a factor of production in capital theoretic valuation equilibrium models. Our aggregate production function is consistent with both the classical demand for money function relationship and with extended periods of near zero short-term nominal interest rates. In our model economy, there is a 100 percent reserve requirement on all demand deposits. Demand deposits are legal tender. We find (i) money services in the production function necessitates revisions in the national accounts; (ii) monetary and fiscal policy cannot be completely separated; (iii) for a given policy, equilibrium is either unique or does not exist; and (iv) Friedman’s monetary satiation is not optimal. We make quantitative comparisons between interest rate targeting regimes and between inflation rate targeting regimes. The best inflation rate target was 2 percent.
Palavra-chave: Money in production function, Friedman monetary satiation, Interest rate targeting, Zero lower bound, Inflation rate targeting, and 100 percent reserve banking Sujeito: E00 - Macroeconomics and Monetary Economics: General, E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General, E50 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General, and E40 - Money and Interest Rates: General
Creator: Ohanian, Lee E., Restrepo-Echavarria, Paulina, and Wright, Mark L. J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 563 Abstract:
After World War II, international capital flowed into slow-growing Latin America rather than fast-growing Asia. This is surprising as, everything else equal, fast growth should imply high capital returns. This paper develops a capital flow accounting framework to quantify the role of different factor market distortions in producing these patterns. Surprisingly, we find that distortions in labor markets — rather than domestic or international capital markets — account for the bulk of these flows. Labor market distortions that indirectly depress investment incentives by lowering equilibrium labor supply explain two-thirds of observed flows, while improvement in these distortions over time accounts for much of Asia’s rapid growth.
Palavra-chave: Labor markets, Domestic capital markets, Capital flows, and International capital markets Sujeito: E21 - Macroeconomics: Consumption; Saving; Wealth, F41 - Open Economy Macroeconomics, F21 - International Investment; Long-term Capital Movements, and J20 - Demand and Supply of Labor: General
Creator: Atkeson, Andrew, Eisfeldt, Andrea L., Weill, Pierre-Olivier, and d'Avernas, Adrien Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 567 Abstract:
Banks' ratio of the market value to book value of their equity was close to 1 until the 1990s, then more than doubled during the 1996-2007 period, and fell again to values close to 1 after the 2008 financial crisis. Sarin and Summers (2016) and Chousakos and Gorton (2017) argue that the drop in banks' market-to-book ratio since the crisis is due to a loss in bank franchise value or profitability. In this paper we argue that banks' market-to-book ratio is the sum of two components: franchise value and the value of government guarantees. We empirically decompose the ratio between these two components and find that a large portion of the variation in this ratio over time is due to changes in the value of government guarantees.
Palavra-chave: Bank valuation, Bank leverage, Risk shifting, Bank financial soundness, Banking, and Bank regulation Sujeito: H12 - Crisis Management, G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill, E44 - Financial Markets and the Macroeconomy, G38 - Corporate Finance and Governance: Government Policy and Regulation, G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages, and G28 - Financial Institutions and Services: Government Policy and Regulation
Creator: Cai, Zhifeng and Heathcote, Jonathan Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 569 Abstract:
This paper evaluates the role of rising income inequality in explaining observed growth in college tuition. We develop a competitive model of the college market in which college quality depends on instructional expenditure and the average ability of admitted students. An innovative feature of our model is that it allows for a continuous distribution of college quality. We find that observed increases in US income inequality can explain more than the entire observed rise in average net tuition since 1990 and that rising income inequality has also depressed college attendance.
Palavra-chave: College tuition, Club goods, and Income inequality Sujeito: I23 - Higher Education; Research Institutions, I24 - Education and Inequality, and I22 - Educational Finance; Financial Aid
Creator: Fogli, Alessandra and Veldkamp, Laura Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 572 Abstract:
Does the pattern of social connections between individuals matter for macroeconomic outcomes? If so, where do these differences come from and how large are their effects? Using network analysis tools, we explore how different social network structures affect technology diffusion and thereby a country's rate of growth. The correlation between high-diffusion networks and income is strongly positive. But when we use a model to isolate the effect of a change in social networks, the effect can be positive, negative, or zero. The reason is that networks diffuse ideas and disease. Low-diffusion networks have evolved in countries where disease is prevalent because limited connectivity protects residents from epidemics. But a low-diffusion network in a low-disease environment needlessly compromises the diffusion of good ideas. In general, social networks have evolved to fit their economic and epidemiological environment. Trying to change networks in one country to mimic those in a higher-income country may well be counterproductive.
Palavra-chave: Social networks, Economic networks, Disease , Development, Growth, Technology diffusion, and Pathogens Sujeito: I10 - Health: General, O10 - Economic Development: General, E02 - Institutions and the Macroeconomy, and O33 - Technological Change: Choices and Consequences; Diffusion Processes
Creator: Koijen, Ralph S. J. and Yogo, Motohiro Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 510 Abstract:
We develop an asset pricing model with flexible heterogeneity in asset demand across investors, designed to match institutional and household holdings. A portfolio choice model implies characteristics-based demand when returns have a factor structure and expected returns and factor loadings depend on the assets' own characteristics. We propose an instrumental variables estimator for the characteristics-based demand system to address the endogeneity of demand and asset prices. Using U.S. stock market data, we illustrate how the model could be used to understand the role of institutions in asset market movements, volatility, and predictability.
Palavra-chave: Demand system, Liquidity, Portfolio choice, Asset pricing model, and Institutional investors Sujeito: G23 - Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors and G12 - Asset Pricing; Trading Volume; Bond Interest Rates
Creator: Heathcote, Jonathan and Tsujiyama, Hitoshi Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 507 Abstract:
What structure of income taxation maximizes the social benefits of redistribution while minimizing the social harm associated with distorting the allocation of labor input? Many authors have advocated scrapping the current tax system, which redistributes primarily via marginal tax rates that rise with income, and replacing it with a flat tax system, in which marginal tax rates are constant and redistribution is achieved via non-means-tested transfers. In this paper we compare alternative tax systems in an environment with distinct roles for public and private insurance. We evaluate alternative policies using a social welfare function designed to capture the taste for redistribution reflected in the current tax system. In our preferred specification, moving to the optimal flat tax policy reduces welfare, whereas moving to the optimal fully nonlinear Mirrlees policy generates only tiny welfare gains. These findings suggest that proposals for dramatic tax reform should be viewed with caution.
Palavra-chave: Flat tax, Social welfare functions, Ramsey taxation, Tax progressivity, Private insurance, Mirrlees taxation, and Optimal income taxation Sujeito: E62 - Fiscal Policy, H23 - Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies, H21 - Taxation and Subsidies: Efficiency; Optimal Taxation, and H31 - Fiscal Policies and Behavior of Economic Agents: Household
Creator: Conesa, Juan Carlos, Kehoe, Timothy Jerome, 1953-, Nygaard, Vegard M., and Raveendranathan, Gajendran Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 583 Abstract:
We develop and calibrate an overlapping generations general equilibrium model of the U.S. economy with heterogeneous consumers who face idiosyncratic earnings and health risk to study the implications of exogenous trends in increasing college attainment, decreasing fertility, and increasing longevity between 2005 and 2100. While all three trends contribute to a higher old age dependency ratio, increasing college attainment has different macroeconomic implications because it increases labor productivity. Decreasing fertility and increasing longevity require the government to increase the average labor tax rate from 32.0 to 44.4 percent. Increasing college attainment lowers the required tax increase by 10.1 percentage points. The required tax increase is higher under general equilibrium than in a small open economy with a constant interest rate because the reduction in the interest rate lowers capital income tax revenues.
Palavra-chave: College attainment, Health care, Aging, Taxation, and Overlapping generations Sujeito: H55 - Social Security and Public Pensions, I13 - Health Insurance, Public and Private, H20 - Taxation, Subsidies, and Revenue: General, H51 - National Government Expenditures and Health, and J11 - Demographic Trends, Macroeconomic Effects, and Forecasts
Creator: Ayres, João, Hevia, Constantino, and Nicolini, Juan Pablo Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 584 Abstract:
In this paper, we show that there is substantial comovement between prices of primary commodities such as oil, aluminum, maize, or copper and real exchange rates between developed economies such as Germany, Japan, and the United Kingdom against the US dollar. We therefore explicitly consider the production of commodities in a two-country model of trade with productivity shocks and shocks to the supplies of commodities. We calibrate the model so as to reproduce the volatility and persistence of primary commodity prices and show that it delivers equilibrium real exchange rates that are as volatile and persistent as in the data. The model rationalizes an empirical strategy to identify the fraction of the variance of real exchange rates that can be accounted for by the underlying shocks, even if those are not observable. We use this strategy to argue that shocks that move primary commodity prices account for a large fraction of the volatility of real exchange rates in the data. Our analysis implies that existing models used to analyze real exchange rates between large economies that mostly focus on trade between differentiated final goods could benefit, in terms of matching the behavior of real exchange rates, by also considering trade in primary commodities.
Palavra-chave: Real exchange rate disconnect puzzle and Primary commodity prices Sujeito: F41 - Open Economy Macroeconomics and F31 - Foreign Exchange
Creator: Aiyagari, S. Rao, Braun, R. Anton, and Eckstein, Zvi Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 241 Abstract:
This paper is motivated by empirical observations on the comovements of currency velocity, inflation, and the relative size of the credit services sector. We document these comovements and incorporate into a monetary growth model a credit services sector that provides services that help people economize on money. Our model makes two new contributions. First, we show that direct evidence on the appropriately defined credit service sector for the United States is consistent with the welfare cost measured using an estimated money demand schedule. Second, we provide welfare cost of inflation estimates that have some new features.
Sujeito: E31 - Price Level; Inflation; Deflation and E51 - Money Supply; Credit; Money Multipliers
Creator: Ayres, João, Garcia, Márcio Gomes Pinto, Guillen, Diogo, and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 575 Abstract:
Brazil has had a long period of high inflation. It peaked around 100 percent per year in 1964, decreased until the first oil shock (1973), but accelerated again afterward, reaching levels above 100 percent on average between 1980 and 1994. This last period coincided with severe balance of payments problems and economic stagnation that followed the external debt crisis in the early 1980s. We show that the high-inflation period (1960-1994) was characterized by a combination of fiscal deficits, passive monetary policy, and constraints on debt financing. The transition to the low-inflation period (1995-2016) was characterized by improvements in all of these features, but it did not lead to significant improvements in economic growth. In addition, we document a strong positive correlation between inflation rates and seigniorage revenues, although inflation rates are relatively high for modest levels of seigniorage revenues. Finally, we discuss the role of the weak institutional framework surrounding the fiscal and monetary authorities and the role of monetary passiveness and inflation indexation in accounting for the unique features of inflation dynamics in Brazil.
Palavra-chave: Brazil's stagnation, Brazil's hyperinflation, Fiscal deficit, Stabilization plans, and Debt accounting Sujeito: E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, H62 - National Deficit; Surplus, E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy, and H63 - National Debt; Debt Management; Sovereign Debt
Creator: Atkeson, Andrew and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 412 Abstract:
We present a pricing kernel that summarizes well the main features of the dynamics of interest rates and risk in postwar U.S. data and use it to uncover how the pricing kernel has moved with the short rate. Our findings imply that standard monetary models miss an essential link between the central bank instrument and the economic activity that monetary policy is intended to affect, and thus we call for a new approach to monetary policy analysis. We sketch a new approach using an economic model based on our pricing kernel. The model incorporates the key relationships between policy and risk movements in an unconventional way: the central bank’s policy changes are viewed as primarily intended to compensate for exogenous business cycle fluctuations in risk that threaten to push inflation off target. This model, while an improvement over standard models, is considered just a starting point for their revision.
Sujeito: E58 - Central Banks and Their Policies, E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General, E50 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General, and E52 - Monetary Policy
Creator: Prescott, Edward C. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 102 Abstract:
Recent developments in business cycle theory are reviewed. The principal finding is that the growth model, which was developed to account for the secular patterns in important economic aggregates, displays the business cycle phenomena once it incorporates the observed randomness in the rate of technological advance. The amplitudes and serial correlation properties of fluctuations in output and employment that the growth model predicts match those historically experienced in the United States. Further, the model continues to display the growth facts it was developed to explain.
Creator: Atkeson, Andrew and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 162 Abstract:
In this paper, we build a model of the transition following large-scale economic reforms that predicts both a substantial drop in output and a prolonged pause in physical investment as the initial phase of the optimal transition following the reform. We model reform as a change in policy which induces agents to close existing enterprises using old technologies of production and to open up new enterprises adopting new technologies of production. The central idea of our paper is that it is costly to close old enterprises and open new enterprises because, in doing so, information capital built up about old enterprises is lost and time must pass before information capital about new enterprises can be acquired. Thus, an acceleration of the pace of industry evolution leads in the short run to a net loss of information capital, a drop in productivity, a recession, and a fall in physical investment. We calibrate our model of industry evolution, information capital, and transition to match micro data on industry evolution in the United States and macro data from the United States, Japan, and the former communist countries of Europe. We find that the loss of information capital that accompanies a major acceleration in the pace of industry evolution in an economy leads initially to a decade of recession and a five year pause in physical investment before the benefits of reform are realized.
Palavra-chave: Transition, Organization capital, and Eastern Europe Sujeito: F41 - Open Economy Macroeconomics, O31 - Innovation and Invention: Processes and Incentives, and J64 - Unemployment: Models, Duration, Incidence, and Job Search
Creator: Hansen, Lars Peter, McGrattan, Ellen R., and Sargent, Thomas J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 182 Abstract:
This paper catalogues formulas that are useful for estimating dynamic linear economic models. We describe algorithms for computing equilibria of an economic model and for recursively computing a Gaussian likelihood function and its gradient with respect to parameters. We display an application to Rosen, Murphy, and Scheinkman's (1994) model of cattle cycles.
Creator: Holmes, Thomas J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 190 Abstract:
This paper considers Marshall's argument that geographic concentration of industry facilitates specialization. I use Census data on manufacturing plants to examine the relationship between localization of industry and vertical disintegration. I find that establishments located near other establishments within the same industry tend to make more intensive use of purchased inputs than establishments without own-industry neighbors. This relationship only holds among industries that are geographically concentrated; having neighbors makes no difference in geographically dispersed industries. I argue that this pattern is consistent with a model in which increased opportunity for specialization is the reason some industries localize.
Creator: Anderson, Evan W. , Hansen, Lars Peter, McGrattan, Ellen R., and Sargent, Thomas J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 198 Abstract:
This paper catalogues formulas that are useful for estimating dynamic linear economic models. We describe algorithms for computing equilibria of an economic model and for recursively computing a Gaussian likelihood function and its gradient with respect to parameters. We apply these methods to several example economies.
Creator: Prescott, Edward C. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 321 Abstract:
Americans now work 50 percent more than do the Germans, French, and Italians. This was not the case in the early 1970s when the Western Europeans worked more than Americans. In this paper, I examine the role of taxes in accounting for the differences in labor supply across time and across countries, in particular, the effective marginal tax rate on labor income. The population of countries considered is that of the G-7 countries, which are major advanced industrial countries. The surprising finding is that this marginal tax rate accounts for the predominance of the differences at points in time and the large change in relative labor supply over time with the exception of the Italian labor supply in the early 1970s.
Palavra-chave: International Labor Supply, International Tax Rates, and Social Security Reform Sujeito: H20 - Taxation, Subsidies, and Revenue: General, E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity, E13 - General Aggregative Models: Neoclassical, and E62 - Fiscal Policy
Creator: Chari, V. V., Kehoe, Patrick J., and McGrattan, Ellen R. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 204 Abstract:
We ask what fraction of the variation in incomes across countries can be accounted for by investment distortions. In our neoclassical growth model the relative price of investment to consumption is a good measure of the distortions. Using data on relative prices we estimate a stochastic process for distortions and compare the resulting variance of incomes in the model to that in the data. We find that the variation of incomes in the model is roughly 4/5 of the variability of incomes in the data. Our model does well in accounting for 6 key regularities on income and investment in the data.
The paper itself is followed by three appendices: Appendix 1 describing the log-likelihood function, Appendix 2 describing the construction of labor share of income associated with the production of consumption and investment goods, and the Data Appendix.
Sujeito: O11 - Macroeconomic Analyses of Economic Development, H20 - Taxation, Subsidies, and Revenue: General, O10 - Economic Development: General, and O57 - Comparative Studies of Countries
Creator: Holmes, Thomas J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 205 Abstract:
This paper provides new evidence that state policies play a role in the location of industry. The paper classifies a state as pro-business or anti-business depending upon whether or not the state has a right-to-work law. The paper finds that, on average, there is a large abrupt increase in manufacturing activity when crossing a state border from an anti-business state into a pro-business state.
Sujeito: L60 - Industry Studies: Manufacturing: General, L52 - Industrial Policy; Sectoral Planning Methods, and R38 - Production Analysis and Firm Location: Government Policy