Search Results
Journal Article
Setting the interest rate
Journal Article
Mortgage refinancing
Journal Article
Inflation: the 2% solution
Journal Article
Shifting household assets in a bear market
Working Paper
Mortgages as Recursive Contracts
Mortgages are one-sided contracts under which the borrower may terminate the contract at any time, while the lender must commit to honoring the terms of the contract throughout its life. There are two aspects to this feature of the contract that are modeled in this paper. The first is that the borrower may choose between buying a house or renting. Given these alternatives, a contract between a household and a lender makes home ownership feasible, and provides insurance to the household against fluctuating rental payments. The second is that once in a contract, the household may terminate the ...
Working Paper
Relative Productivity Growth and the Secular “Decline” of U.S. Manufacturing
There has been considerable debate about the causes of the "decline" of U.S. manufacturing over the post-war period. We show that the behavior of employment, prices and output in manufacturing relative to services over this period can be explained by a two-sector growth model in which productivity shocks are the only driving forces. The data also suggest that households are unwilling to substitute goods for services (the estimated elasticity of substitution is statistically indistinguishable from zero), so the economy adjusts to differential productivity growth entirely by reallocating labor ...
Working Paper
An RBC model with growth: the role of human capital
Working Paper
Productivity shocks in a model with vintage capital and heterogeneous labor
We construct a vintage capital model in which worker skills lie along a continuum and workers can be paired with different vintages (as technology evolves) under a matching rule of "best worker with the best machine." Labor reallocation in response to technology shocks has two key implications for the wage premium. First, it limits both the magnitude and duration of change in the wage premium following a (permanent) embodied technology shock, so empirically plausible shocks do not lead to the kind of increases in the wage premium observed in the U.S. during the 1980s and early 1990s (though ...
Journal Article
What's different about banks - still?
Working Paper
The role of capital service-life in a model with heterogenous labor and vintage capital
We examine how the economy responds to both disembodied and embodied technology shocks in a model with vintage capital. We focus on what happens when there is a change in the number of vintages of capital that are in use at any one time and on what happens when there is a change in the persistence of the shocks hitting the economy. The data suggest that these kinds of changes took place in the U.S. economy in the 1990s, when the pace of embodied technical progress appears to have accelerated. We find that embodied technology shocks lead to greater variability (of output, investment and labor ...