Search Results
Journal Article
Policy Instability and the Risk-Return Trade-Off
What is the impact of large swings in economic policy on the risk-return trade-off faced by investors? What is the impact of changes in policy regimes on investment strategies? In this paper we study the impact on returns of switches between periods of market-friendly economic policies and periods of populist policies. To quantify the impact of policy instability, we use data from Argentina—a country that has experienced frequent and very large regime changes—and find that the risk-return for individual assets and minimum variance portfolios are quite different across regimes. We then ...
Journal Article
\\"Frictions in financial and labor markets\\": a summary of the 35th Annual Economic Policy Conference
This article contains synopses of the papers presented at the 35th Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis held October 21-22, 2010. The conference theme was ?Frictions in Financial and Labor Markets.? Leading participants in this field presented their research and commentary.
Conference Paper
Inflation, growth, and financial intermediation
Journal Article
Inflation, growth, and financial intermediation
Working Paper
Lifetime labor supply and human capital investment
We develop a model of retirement and human capital investment to study the effects of tax and retirement policies. Workers choose the supply of raw labor (career length) and also the human capital embodied in their labor. Our model explains a significant fraction of the US-Europe difference in schooling and retirement. The model predicts that reforms of the European retirement policies modeled after the US can deliver 15?35 percent gains in per-worker output in the long run. Increased human capital investment in and out of school accounts for most of the gains, with relatively small changes ...
Working Paper
Sectoral shocks, reallocation frictions, and optimal government spending
What is the optimal policy response to a negative sectoral shock? How do frictions in goods and labor markets affect the nature and speed of the process of reallocating resources across alternative uses? Should government controlled inputs be allocated to compensate for frictions faced by the private sector or, rather, should they be deployed to complement private sector decisions? In this paper we make a first attempt to understand what features of an economy determine the answers to the previous questions. We study a model in which the drop in the private demand for structures frees up ...
Journal Article
The growth effects of monetary policy
This article investigates the relationship between inflation and output, in the data and in standard models. The article reports that empirical cross-country studies generally find a nonlinear, negative relationship between inflation and output, a relationship that standard models cannot come close to reproducing. The article demonstrates that the models' problem may be due to their standard narrow assumption that all money is held by the public for making transactions. When the models are adjusted to also assume that banks are required to hold money, the models do a much better job. The ...
Working Paper
Frictionless technology diffusion: the case of tractors
Empirical evidence suggests that there is a long lag between the time a new technology is introduced and the time at which it is widely adopted. The conventional wisdom is that this fact is inconsistent with the predictions of the frictionless neoclassical model. In this paper we study the specific case of the diffusion of the tractor in American agriculture between 1910 and 1960. There are three important driving forces: changes in quality, wage rates and prices of substitutes such as horses and mules. We demonstrate that once these exogenous forces are taken into account, the standard ...