Showing 1 - 8 of 8
The unconditional expectation of social welfare is often used to assess alternative macroeconomic policy rules in applied quantitative research. It is shown that it is generally possible to derive a linear - quadratic problem that approximates the exact non-linear problem where the unconditional...
Persistent link: https://www.econbiz.de/10010550787
The unconditional expectation of social welfare is often used to assess alternative macroeconomic policy rules in applied quantitative research. It is shown that it is generally possible to derive a linear-quadratic problem that approximates the exact non-linear problem where the unconditional...
Persistent link: https://www.econbiz.de/10010550798
A stylized macroeconomic model is developed with an indebted, heterogeneous Investment Banking Sector funded by borrowing from a retail banking sector. The government guarantees retail deposits. Investment banks choose how risky their activities should be. We compared the benefits of separated...
Persistent link: https://www.econbiz.de/10010552378
What is the seigniorage-maximizing level of inflation? Four models formulae for the seigniorage maximizing inflation rate (SMIR) are compared. Two sticky-price models arrive at very different quantitative recommendations although both predict somewhat lower SMIRs than Cagan’s formula and a...
Persistent link: https://www.econbiz.de/10010552408
Less is known about social welfare objectives when it is costly to change prices, as in Rotemberg (1982), compared with Calvo-type models. We derive a quadratic approximate welfare function around a distorted steady state for the costly price adjustment model. We highlight the similarities and...
Persistent link: https://www.econbiz.de/10010553685
This paper proposes a simple framework for understanding endogenous transaction costs - their composition, size and implications. In a model of diversification against risk, we distinguish between investments in institutions that facilitate exchange and the costs of conducting exchange itself....
Persistent link: https://www.econbiz.de/10010550777
Employing the financial accelerator (FA) model of Bernanke, Gertler and Gilchrist (1999) enhanced to include a shock to the FA mechanism, we construct and study shocks to the efficiency of the financial sector in post-war US business cycles. We find that financial shocks are very tightly linked...
Persistent link: https://www.econbiz.de/10010550803
Some studies argue that the Fed reacts to financial market developments. Using data covering the period 1985:Q1 - 2008:Q4 and employing an augmented Taylor rule specification, we re-examine that conjecture. We find that evidence in favour of such a reaction is largely driven by the Fed’s...
Persistent link: https://www.econbiz.de/10011075640