Making the central bank more independent from political pressures lowers inflation and increases the primary deficit, persistently. In the long-run, however, fiscal considerations are paramount and inflation comes back up to accommodate the higher financial burden of accumulated public debt.
Policymakers often use measures of tax incidence (generational accounts) as criteria for policy selection. We use a quantitative model of optimal intergenerational policy to evaluate the ability of the tax incidence metric to capture the identity of recipients and contributors and the magnitudes transferred.
Most empirical studies based on U.S. data suggest that the fiscal multiplier is less
than 1 (e.g., Barro and Redlick, 2011). However, Keynes argued that the multiplier
would be the largest when markets have failed to the greatest extent in coordinating
economic activities (such as during the Great Depression with rampant unemployment
and low capacity utilization).
We construct a model to capture the Keynesian idea that production and employment
decisions are based on expectations of aggregate demand driven by sentiments and
that realized demand follows from the production and employment decisions of firms.
This paper offers a methodological contribution to monetary theory. First, it presents
a model economy with cash-in-advance constraints, following the work of Lucas in the
early 80’s; then, it specializes the model to preferences and shocks assumed in the
Lagos and Wright (2005) framework.
On May 29, 2008, the Wall Street Journal reported that several large international banks were reporting unjustifiably low LIBOR rates. Since then two large banks, Barclays and UBS, have paid significant fines for manipulating their LIBOR rates, and additional banks are expected to be fined.
Both global and regional economic linkages have strengthened substantially over the
past quarter century. We employ a dynamic factor model to analyze the implications of these
linkages for the evolution of global and regional business cycles.
This paper provides a general framework for the quantitative analysis of
stochastic dynamic models. We review convergence properties of some
numerical algorithms and available methods to bound approximation errors.
We consider the interactions between domestic lobbying and two types of cross-border
lobbying in a Customs Union (CU). The two types of cross-border lobbying are (i) lobbying
from firms in one CU country to the governments of other CU countries, and (ii) that from
firms outside the CU.
We estimate a DSGE model with (S,s) inventory policies. We find that (i) taking
inventories into account can significantly improve the empirical fit of DSGE models
in matching the standard business-cycle moments (in addition to explaining inventory
fluctuations); (ii) (S,s) inventory policies can significantly amplify aggregate output
fluctuations, in contrast to the findings of the recent general-equilibrium inventory
literature; and (iii) aggregate demand shocks become more important than technol-
ogy shocks in explaining the business cycle once inventories are incorporated into the
How do job losers use default -- a phenomenon 6x more prevalent than bankruptcy
--as a type of “informal" unemployment insurance, and more importantly, what are
the social costs and benefits of this behavior?
We review the responses of the Federal Reserve to financial crises over the past 100 years. The authors of the Federal Reserve Act in 1913 created an institution that they hoped would prevent banking panics from occurring.
The recent financial crisis has focused attention on the relationship between access to finance and international trade, triggering a burgeoning segment of the literature evaluating this link empirically.
Middle Eastern and North African (MENA) countries stand out in international comparisons of de jure obstacles to female employment and entrepreneurship. These obstacles manifest themselves in low rates of female labor participation, entrepreneurship, and ownership.
This paper explores children's cognitive outcomes using novel panel data from India for children 6 months through 8 years. For the first time in a developing country, this allow us to estimate a value-added model of cognitive development at a very young age.