Search Results
Working Paper
Efficient investment in children
If children are society?s most precious resource, as many would argue, how should we invest in them? To gain insight into this question, the authors develop a dynamic, general-equilibrium model in which children differ by ability. Parents invest time and money in their offspring, depending on their altruism, to help them grow into more productive adults. The authors characterize the efficient allocation, then compare it with the outcome that arises when financial markets are incomplete. They also examine the situation where childcare markets are lacking and analyze the consequences of impure ...
Working Paper
Money and dynamic credit arrangements with private information
The authors construct a model with private information in which consumers write dynamic contracts with financial intermediaries.
Discussion Paper
Efficient investment in children
Many would say that children are societys most precious resource. So, how should it invest in them? To gain insight into this question, a dynamic general equilibrium model is developed where children differ by ability. Parents invest time and money in their offspring, depending on their altruism. This allows their children to grow up as more productive adults. First, the efficient allocation for the framework is characterized. Next, this is compared with the case of incomplete financial markets. Then, the situation where childcare markets are also lacking is examined. Additionally, the ...
Discussion Paper
The output, employment, and interest rate effects of government consumption
This paper investigates the impact of aggregate variables of changes in government consumption in the context of a stochastic, neoclassical growth model. We show, theoretically, that the impact on output and employment of a persistent change in government consumption exceeds that of a temporary change. We also show that, in principle, there can be an analog to the Keynesian multiplier in the neoclassical growth model. Finally, in an empirically plausible version of the model, we show that the interest rate impact of a persistent government consumption shock exceeds that of a temporary one. ...
Journal Article
Macroeconomics with frictions
This article is a progress report on research that attempts to include one type of market incompleteness and frictions in macroeconomic models. The focus of the research is the absence of insurance markets in which individual-specific risks may be insured against. The article describes some areas where this type of research has been and promises to be particularly useful, including consumption and saving, wealth distribution, asset markets, business cycles, and fiscal policies. The article also describes work in each of these areas that was presented at a conference sponsored by the Federal ...
Journal Article
Intergenerational linkages and government budget policies
Journal Article
How should taxes be set?
Journal Article
Response to a defense of zero inflation
This essay distills the differences between zero inflation proponents and critics to three main questions: Can the central bank make a credible commitment to maintaining a stable price level? Should monetary policy be used to reduce the tax on capital income? And would reducing uncertainty about inflation produce significant social benefits? Proponents of zero inflation answer all three questions yes, while critics answer no. The essay reviews both answers for each question and suggests that the disagreements are at least partly due to inadequacies in economic models. The essay repeats the ...