Search Results
Speech
Classic Policy Benchmarks for Economies with Substantial Inequality
St. Louis Fed President Jim Bullard participated on a policy panel during the Annual Conference of the Central Bank of Chile. The topic of the conference was “Heterogeneity in Macroeconomics: Implications for Monetary Policy.”During the panel discussion, Bullard presented "Classic Policy Benchmarks for Economies with Substantial Inequality." In the presentation, he outlined an argument that the contribution of a central bank to optimal macroeconomic policy may not be importantly altered by the presence of heterogeneous households. (He has presented previous versions of these slides at ...
Journal Article
Closing the gap
Speech
\"Optimal Monetary Policy for the Masses: a presentation at the Center for Research on the Wisconsin Economy, University of Wisconsin-Madison, Madison, Wis.
In a presentation at the University of Wisconsin-Madison, St. Louis Fed President James Bullard highlighted his recent working paper, which examines whether monetary policy can be conducted in a way that benefits all households even in a world with substantial income, financial wealth and consumption inequality. In the paper, nominal GDP targeting constitutes ?optimal monetary policy for the masses,? he said.
Working Paper
Optimal Monetary Policy for the Masses
We study nominal GDP targeting as optimal monetary policy in a simple and stylized model with a credit market friction. The macroeconomy we studyhas considerable income inequality, which gives rise to a large private sector credit market. There is an important credit market friction because households participating in the credit market use non-state contingent nominal contracts (NSCNC). We extend previous results in this model by allowing for substantial intra-cohort heterogeneity. The heterogeneity is substantial enough that we can approach measured Gini coefficients for income, financial ...
Journal Article
Income differences around the globe go beyond physical, human capital
Differences in physical and human capital don't fully explain the staggering differences in living standards around the globe. The high cost of starting a new business and the difficulties in obtaining financing in some countries also are key factors.
Working Paper
Comovement: it's not a puzzle
A defining feature of business cycles is the comovement of inputs at the sectoral level with aggregate activity. Standard models cannot account for this phenomenon. This paper develops and estimates a two-sector dynamic general equilibrium model that can account for this key regularity. My model incorporates three shocks to the economy: monetary policy shocks, neutral technology shocks, and embodied technology shocks in the capital-producing sector. The estimated model is able to account for the response of the US economy to all three shocks. Using this model, I argue that the key friction ...
Working Paper
Optimal monetary policy, endogenous sticky prices and multiplicity of equilibria
We analyze optimal discretionary monetary policy in an endogenous sticky prices model. Similar models with exogenous sticky prices can deliver multiple equilibria. This is a necessary condition for the occurrence of expectation traps (when private agents? expectations determine the equilibrium level of inflation). In our model, sticky price firms are allowed to switch to flexible pricing by paying a random cost. For plausible parametrizations, our model has a unique low-inflation equilibrium. With endogenous sticky prices, the monetary authority does not validate high-inflation expectations ...
Working Paper
Heterogeneous firms, productivity and poverty traps
We present a model of endogenous total factor productivity which generates poverty traps. We obtain multiple steady-state equilibria for an arbitrarily small degree of increasing returns to scale. While the most productive firms operate across all the steady states, in a poverty trap less productive firms operate as well. This results in lower average firm productivity and lower total factor productivity. In our model a growth miracle is accompanied by a shift of employment from small to large firms, consistent with the empirical evidence. We calibrate our model and relate entry costs to the ...