Search Results
Journal Article
Two perspectives on growth and taxes
Journal Article
Commentary on \\"Monetary policy as equilibrium selection\\"
Working Paper
Irrational expectations and econometric practice: discussion of Orphanides and Williams, \"Inflation scares and forecast-based monetary policy\"
Athanasios Orphanides and John C. Williams' excellent conference paper, "Inflation Scares and Forecast-Based Monetary Policy," contributes importantly to the new and rapidly growing branch of the literature on bounded rationality and learning in macroeconomics. Their paper, like many others, derives interesting and useful theoretical results that show how the introduction of bounded rationality and learning impacts on the effects of monetary policy shocks and the characteristics of optimal monetary policy rules. This note suggests that some additional empirical work-some "irrational ...
Working Paper
Endogenous financial innovation and the demand for money
This paper embeds two key ideas about the nature of financial innovation taken from the empirical literature into a familiar equilibrium monetary model. It provides formal support for several alternative econometric specifications for money demand that attempt to capture the effects of financial innovation and demonstrates that a popular theoretical model of money demand, when suitably modified, can account for some unusual monetary dynamics found in the data. Thus, it helps to establish both the theoretical relevance of recent empirical work and the empirical relevance of recent theoretical ...
Working Paper
Stopping inflations, big and small
Previous studies of disinflation work with models in which firms use time-dependent strategies, changing nominal prices at intervals of fixed length. These models may be criticized for failing to allow pricing behavior to adjust after a large shift in policy regime. Consequently, this paper develops a model that allows firms to adopt strategies that are partially state-dependent, changing nominal prices whenever they deviate sufficiently from their target values. The paper uses this model to examine how the welfare costs and benefits of disinflation vary with the initial inflation rate and ...
Journal Article
Price stability under long-run monetary targeting
Working Paper
Liquidity effects and transactions technologies
Recently there has been renewed interest in using general equilibrium models to understand the effects of monetary policy on interest rates and real economic activity. This research effort involved the search for models that will account for the liquidity effects--the decrease in short-term interest rates and the increase in output and employment--that are associated with expansionary monetary policy.
Conference Paper
Liquidity effects and transactions technologies
Working Paper
Changes in the Federal Reserve's inflation target: causes and consequences
This paper estimates a New Keynesian model to draw inferences about the behavior of the Federal Reserve?s unobserved inflation target. The results indicate that the target rose from 1- 1/4 percent in 1959 to over 8 percent in the mid-to-late 1970s before falling back below 2-1/2 percent in 2004. The results also provide some support for the hypothesis that over the entire postwar period, Federal Reserve policy has systematically translated short-run price pressures set off by supply-side shocks into more persistent movements in inflation itself, although considerable uncertainty remains about ...
Working Paper
Money and the gain from enduring relationships in the turnpike model
This paper presents a stochastic version of Townsend's turnpike model in which the aggregate endowment is distributed randomly between two sets of agents and in which agents of each type are allowed to remain at a trading post for multiple periods. Agents use money as a means of exchange when they meet as strangers but use private securities when they remain paired at the same trading post. Both welfare and the income velocity of money increase monotonically with the length of the trading session.