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Escaping from a Liquidity Trap and Deflation : The Foolproof Way and Others

Svensson, Lars E. O. - 2021

Existing proposals to escape from a liquidity trap and deflation, including my Foolproof Way,' are discussed in the light of the optimal way to escape. The optimal way involves three elements: (1) an explicit central-bank commitment to a higher future price level; (2) a concrete action that...

Persistent link: https://www.econbiz.de/10013228748

A Quantitative Model of Sudden Stops and External Liquidity Management

Caballero, Ricardo J.; Panageas, Stauros - 2021

Emerging market economies, which have much of their growth ahead of them, run persistent current account deficits in order to smooth consumption intertemporally. The counterpart of these deficits is their dependence on capital inflows, which can suddenly stop. In this paper we develop and...

Persistent link: https://www.econbiz.de/10013228758

Improper Churn : Social Costs and Macroeconomic Consequences

Caballero, Ricardo J.; Hammour, Mohamad L. - 2021

This paper assembles elements that are essential in forming an integral picture of the way a churning' economy functions and of the disruptions caused by transactional difficulties in labor and financial markets. We couch our analysis in a stochastic equilibrium model anchored with US evidence...

Persistent link: https://www.econbiz.de/10013228977

Optimal Time-Consistent Fiscal Policy with Uncertain Lifetimes

Calvo, Guillermo; Obstfeld, Maurice - 2021

This paper studies optimal fiscal policy in an economy where heterogeneous agents with uncertain lifetimes coexist. We show that some plausible social welfare functions lead to time-inconsistent optimal plans, and we suggest restrictions on social preferences that avoid the problem. The...

Persistent link: https://www.econbiz.de/10013229006

Optimal Inflation Targets, `Conservative' Central Banks, and Linear Inflation Contracts

Svensson, Lars E. O. - 2021

Inflation target regimes (like those of New Zealand, Canada, U.K., Sweden and Finland) are interpreted as having explicit inflation targets and implicit output/unemployment targets. Without output-unemployment persistence delegation of monetary policy to a discretionary instrument-independent...

Persistent link: https://www.econbiz.de/10013229046

Optimal Policy with Partial Information in a Forward-Looking Model : Certainty-Equivalence Redux

Svensson, Lars E. O.; Woodford, Michael - 2021

This paper proves a certainty equivalence result for optimal policy under commitment with symmetric partial information …, Indicator Variables for Optimal Policy,' which synthesizes what is known about the case of symmetric partial information, and …, and thereby potentially affect the future information available …

Persistent link: https://www.econbiz.de/10013234360

The Simple Economics of Open Source

Tirole, Jean; Lerner, Joshua - 2021

There has been a recent surge of interest in open source software development, which involves developers at many different locations and organizations sharing code to develop and refine programs. To an economist, the behavior of individual programmers and commercial companies engaged in open...

Persistent link: https://www.econbiz.de/10013234368

Open-Economy Macroeconomics, Developments in Theory and Policy

Obstfeld, Maurice - 2021

This paper surveys recent research in open-economy macroeconomics, using questions raised by European economic and monetary unification to guide the topics discussed. A striking empirical regularity is the tendency for changes in the nominal exchange rate regime systematically to affect the...

Persistent link: https://www.econbiz.de/10013234376

Real Wage Rigidities and the New Keynesian Model

Blanchard, Olivier; Galí, Jordi - 2021

Most central banks perceive a trade-off between stabilizing inflation and stabilizing the gap between output and desired output. However, the standard new Keynesian framework implies no such trade-off. In that framework, stabilizing inflation is equivalent to stabilizing the welfare-relevant...

Persistent link: https://www.econbiz.de/10013235306

Exchange Rate Dynamics Under Stochastic Regime Shifts : a Unified Approach

Froot, Kenneth; Obstfeld, Maurice - 2021

Techniques of regulated Brownian motion are used to analyze the behavior of the exchange rate when official policy reaction functions are subject to future stochastic changes. We examine exchange-rate dynamics in alternative cases where the authorities promise (i) to confine a floating rate...

Persistent link: https://www.econbiz.de/10013235886