Creator: Kocherlakota, Narayana Rao, 1963- Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 274 Abstract:
This paper provides a new rationalization for deposit insurance and systemic disintermediations. I consider an environment in which borrowers face no penalty for failing to repay obligations except the loss of their collateral. I assume that this collateral has aggregate risk. For a subset of the exogenous parameters, I demonstrate that an optimal arrangement features deposit insurance. For a strictly smaller set of parameters, it is optimal in some states of the world to have systemic disintermediation and concomitant falls in real output.
Creator: Kocherlakota, Narayana Rao, 1963- Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 275 Abstract:
In this paper, I provide a possible explanation of why nominally risk-free bonds are essential in monetary economies. I argue that the role of nominal bonds is to serve as record-keeping devices in intertemporal exchanges of money. I show that bonds can only serve this role if they are illiquid (costly to exchange for goods). Finally, I show that in economies in which nominal bonds are essential, welfare and nominal interest rates are both positively associated with the supply of illiquid bonds (if that supply is small).
关键词: Nominal bonds and Money 学科: E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, C78 - Bargaining Theory; Matching Theory, and E58 - Central Banks and Their Policies
Creator: Khan, Aubhik and Thomas, Julia Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 306 Abstract:
Recent empirical analysis has found nonlinearities to be important in understanding aggregated investment. Using an equilibrium business cycle model, we search for aggregate nonlinearities arising from the introduction of nonconvex capital adjustment costs. We find that, while such costs lead to nontrivial nonlinearities in aggregate investment demand, equilibrium investment is effectively unchanged. Our finding, based on a model in which aggregate fluctuations arise through exogenous changes in total factor productivity, is robust to the introduction of shocks to the relative price of investment goods.
关键词: Adjustment costs, Business cycles, Nonlinearities, and Lumpy investment 学科: E32 - Business Fluctuations; Cycles and E22 - Investment; Capital; Intangible Capital; Capacity
Creator: Chari, V. V. and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 308 Abstract:
We analyze the setting of monetary and nonmonetary policies in monetary unions. We show that in these unions a time inconsistency problem in monetary policy leads to a novel type of free-rider problem in the setting of nonmonetary policies, such as labor market policy, fiscal policy, and bank regulation. The free-rider problem leads the union’s members to pursue lax nonmonetary policies that induce the monetary authority to generate high inflation. The free-rider problem can be mitigated by imposing constraints on the nonmonetary policies, like unionwide rules on labor market policy, debt constraints on members’ fiscal policy, and unionwide regulation of banks. When there is no time inconsistency problem, there is no free-rider problem, and constraints on nonmonetary policies are unnecessary and possibly harmful.
关键词: Fixed exchange rates, Monetary regime, Maastricht Treaty, European Union, and Dollarization 学科: F33 - International Monetary Arrangements and Institutions, E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems, E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy, F42 - International Policy Coordination and Transmission, E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination, F41 - Open Economy Macroeconomics, F30 - International Finance: General, and E58 - Central Banks and Their Policies
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.
关键词: International Tax Rates, International Labor Supply, and Social Security Reform 学科: E13 - General Aggregative Models: Neoclassical, E62 - Fiscal Policy, H20 - Taxation, Subsidies, and Revenue: General, and E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Creator: Kehoe, Timothy Jerome, 1953- and Ruhl, Kim J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 324 Abstract:
We propose a methodology for studying changes in bilateral commodity trade due to goods not exported previously or exported only in small quantities. Using a panel of 1,900 country pairs, we find that increased trade of these “least-traded goods” is an important factor in trade growth. This extensive margin accounts for 10 percent of the growth in trade for NAFTA country pairs, for example, and 26 percent in trade between the United States and Chile, China, and Korea. Looking at country pairs with no major trade policy change or structural change, however, we find little change in the extensive margin.
关键词: Structural change, NAFTA , Extensive margin, Trade liberalization, and International trade 学科: O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology, F13 - Trade Policy; International Trade Organizations, F44 - International Business Cycles, and F10 - Trade: General
Creator: King, Robert G. (Robert Graham) and Thomas, Julia Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 327 Abstract:
Many kinds of economic behavior involve discrete and occasional individual choices. Despite this, econometric partial adjustment models perform relatively well at the aggregate level. Analyzing the classic employment adjustment problem, we show how such microeconomic adjustment is well described by a new form of partial adjustment model that aggregates the actions of heterogeneous producers.
We develop a model where individual establishments infrequently alter the sizes of their workforces because such adjustments involve fixed costs. In the market equilibrium, employment responses to aggregate disturbances include changes both in target employments selected by individual establishments and in the measure of establishments actively undertaking adjustment. Yet the model retains a partial adjustment flavor in its aggregate responses. Moreover, in contrast to existing discrete adjustment models, our generalized partial adjustment model is sufficiently tractable to allow general equilibrium analysis, and it naturally extends to accommodate persistent differences in productivity across establishments in general equilibrium.
关键词: Partial Adjustment, (S,s) Adjustment, and Employment Dynamics 学科: E20 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) and E10 - General Aggregative Models: General