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Working Paper
The liquidity premium in average interest rates
This paper studies recent models of the liquidity effect of money on interest rates to determine if a systematic relationship between liquidity shocks and the economy could affect the average real interest rate.
Working Paper
Identifying monetary policy with a model of the federal funds rate
With a stochastic general equilibrium model, we highlight the role of both monetary policy and banks in determining the relationship between the federal funds rate and bank reserves. Monetary policy consists of a stochastic upward-sloping supply schedule for reserves, along with a discount window and open-market operations that are consistent with this schedule. The demand schedule for reserves by banks is downward sloping in the federal runds rate, so shifts in the supply schedule lead to a negative relationship between total reserves and the federal funds rate (a liquidity effect). Shifts ...
Conference Paper
Inflation, financial markets and capital formation - commentary
Journal Article
Inflation, financial markets and capital formation - commentary
Discussion Paper
The effects of stochastic inflation on asset prices
Stochastic inflation affects the risk characteristics, measured by the equity premium and the correlation of the equitys return with consumption, in a fundamental way. The riskiness of a dollar-denominated asset depends on two conditional covariances: the covariance of the marginal rate of substitution (MRS) with the equity price and the covariance of the MRS with the rate of appreciation in the purchasing power of money. The second covariance may take either sign which becomes significant when the risk characteristics of the dollar-denominated asset are compared with the risk characteristics ...
Discussion Paper
Stochastic inflation and the equity premium
The effects of stochastic inflation on equity prices and the equity premium are studied in a pure-endowment asset-pricing model with a cash-in-advance constraint. Stochastic inflation affects the equity premium through two channels: the assessment of an inflation tax and the presence of an inflation premium. Real and monetary versions of the model are simulated and the comparative dynamic results corroborate the conclusion that inflation has quantitatively important effects. ; The other important result is that the equity premium in the real version of a modela continuous state-space ...
Conference Paper
Discount window borrowing and liquidity