Search Results
Working Paper
Liquidity Premiums on Government Debt and the Fiscal Theory of the Price Level
We construct a dynamic general equilibrium model where agents use nominal government bonds as collateral in secured lending arrangements. If the collateral constraint binds, agents price in a liquidity premium on bonds that lowers the real rate on bonds. In equilibrium, the price level is determined according to the fiscal theory of the price level. However, the market value of government debt exceeds its fundamental value. We then examine the dynamic properties of the model and show that the market value of the government debt can fluctuate even though there are no changes to current or ...
Working Paper
Random matching and money in the neoclassical growth model: some analytical results
I use the monetary version of the neoclassical growth model developed by Aruoba, Waller and Wright (2008) to study the properties of the model when there is exogenous growth. I first consider the planner's problem, then the equilibrium outcome in a monetary economy. I do so by first using proportional bargaining to determine the terms of trade and then consider competitive price taking. I obtain closed form solutions for the balanced growth path of all variables in all cases. I then derive closed form solutions for the transition paths under the assumption of full depreciation and, in the ...
Journal Article
Price-level targeting and stabilization policy
The authors construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. The authors? main result is that if the central bank pursues a price-level target, it can control inflation expectations and improve welfare by stabilizing short-run shocks to the economy. The optimal policy involves smoothing nominal interest rates that effectively smooths consumption across states.
Journal Article
Dual-currency economies as multiple-payment systems
Monetary search models are valuable for studying how a second currency's acceptability arises endogenously in an economy that lacks a stable domestic currency and other more sophisticated payment systems. Search models' basic assumptions (absence of credit, lack of smoothly functioning banking systems, reliance on currency as the sole medium of exchange, and primitive trading environments) are not necessarily consistent with modern financial systems. They do, however, provide good descriptions of transitional and developing economies, particularly in the countries of the former Soviet Union, ...
Speech
Demographics, redistribution, and optimal inflation
May 30, 2012. "Demographics, Redistribution, and Optimal Inflation," with Carlos Garriga and Christopher J. Waller. Presented by Christopher Waller at the 2012 BOJ-IMES Conference Demographic Changes and Macroeconomic Performance.
Journal Article
Who Exactly Benefits from Too Big To Fail?
TBTF status leads to a wealth transfer from new buyers to existing holders of the debt.