Search Results
Journal Article
Trade between the United States and Eastern Europe
Working Paper
Macroeconomic policy effects in a monetary union
This paper develops a two-country model of a monetary union. In order to analyze fully the linkages between the countries, the model specifies structural equations for the goods, money and bond markets in each country. Interdependencies arise through trade, the asset markets, and a common currency. The model also includes a supply side for each economy based on an expectations augmented Phillips curve. Using this model it is possible to trace the shifts in aggregate demand and aggregate supply in both countries resulting from a change in fiscal and monetary policies. The results suggest that ...
Working Paper
Government mandated private pensions: a dependable foundation for retirement security?
We develop a model of an overlapping generations economy characterized by private pensions where risk averse agents face both longevity and investment risks. The government mitigates the effects of longevity risk by mandating that individuals purchase annuities. Investment risk arises since the returns on annuities deviate randomly from actuarial fairness as a result of differences in the costs of administering pension funds. Thus, identical agents' pensions may yield drastically different returns: the government's pension policy is not horizontally equitable. We examine whether policies ...
Working Paper
The effects of annuities, bequests, and aging in an overlapping generations model of endogenous growth.
In this paper, we examine the effects of introducing actuarially fair annuity markets into an overlapping generations model of endogenous growth. We find the complete annuitization of agents' wealth is not, in general, dynamically optimal; that the degree of annuitization that is dynamically optimal depends nonmonotonically on the expected length of retirement and on the pay-as-you-go social security tax rate. We find that the government has an incentive to restrict the availability of actuarially fair annuities contracts, and that it can often move the economy from a pay-as-you-go to a ...
Working Paper
A simple model of international capital flows, exchange rate risk, and portfolio choice
This paper examines international capital flows in the context of a simple Diamond-Dybvig model in which there are neither moral hazard nor adverse selection problems, thus isolating exchange rate risk as the propagator of capital flows. The model shows that adverse changes in exchange rate expectations can result in "hot money" flows even when a bank's balance sheet is perfectly transparent and its assets have a positive net present value in local currency terms. The model also indicates that foreign deposit guarantees even in the absence of a change in the bank's portfolio can increase ...
Journal Article
The creation of the Euro and the role of the dollar in international markets
Through the post-World War II period, the U.S. dollar has been the leading currency used in international trade and debt contracts. With the creation of the euro, the dollar may finally face a challenge to its dominance in international markets. This article examines the likely effects of the euro on the international use of the dollar. Moreover, the article considers the implications for the United States and the euro area of a rise in the use of the euro and consequent fall in the use of the dollar internationally.
Working Paper
Size matters: asymmetric exchange rate pass-through at the industry level
Changes in costs faced by firms have direct implications for their price-cost margins. Knowing how prices respond to such cost changes is crucial for understanding how individual markets function and, in turn, for understanding the macroeconomy. We analyze exchange rate pass-through into U.S. import prices for 30 industries to address two questions related to this issue. First, does the direction of a change in the exchange rate affect pass-through? Second, does the size of a change in the exchange rate matter for pass-through? We find that firms in over half the industries studied respond ...
Working Paper
The transition from a-pay-as-you-go to a fully-funded Social Security System: is there a role for social insurance?
This paper develops a model to examine the effects of introducing a fully-funded government sponsored pension plan into an overlapping generations model with an extant pay-as-you-go social security system. We examine whether individual and social welfare can be improved by phasing out the current pay-as-you-go system and replacing it with a fully-funded system in which pension benefits are at least partially annuitized. Furthermore, we consider the effects of means testing social security benefits and providing a income guarantee funded in a pay-as-you-go manner. We find that the presence of ...
Working Paper
Exchange rate pass-through in U. S. manufacturing: exchange rate index choice and asymmetry issues
This paper explores two issues that have received limited attention in the exchange rate pass-through literature. First, are the pass-through estimates sensitive to the choice of the exchange rate index? Second, are pass-through estimates asymmetric with respect to the sign of exchange rate changes? Using data for 87 industries, we find that the answer to both questions is yes. J-test results indicate that the "Major" exchange rate index produced by the Board of Governors of the Federal Reserve System tends to fit the data better than two alternative indexes. With respect to asymmetry, we ...
Journal Article
State exports and the Asian crisis
The Asian crisis caused a decline in most states' exports of manufactured goods to East Asia during 1998, but the severity of the decline varied across states. In this article, Cletus C. Coughlin and Patricia S. Pollard estimate the size of this export shock for all states. Primarily because western states tend to be more dependent on East Asian markets for export sales, they were hit the hardest by the sharp reduction in Asian demand for U.S.-produced manufactured goods. Of the states in which the decline in exports to East Asia lowered the growth of manufacturing output by more than one ...