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We compare alternative optimal public debt adjustment strategies in a New Keynesian economy. We find that the unconditionally optimal policy is consistent with a gradual adjustment in public debt towards its mean value at a speed determined by the rate of time preference of agents. To a...
Persistent link: https://www.econbiz.de/10005036274
Is the relative price of investment goods a good proxy for investment frictions? We analyze investment frictions in an open economy, flexible price, two-country model and show that when the relative price of investment goods is endogenously determined in such a model, the relative price of...
Persistent link: https://www.econbiz.de/10005061486
We consider “robust stability†of a rational expectations equilibrium, which we define as stability under discounted (constant gain) least-squares learning, for a range of gain parameters. We find that for operational forms of policy rules, i.e. rules that do not depend on...
Persistent link: https://www.econbiz.de/10005061488
We analyze the characteristics of optimal dynamics in an economy in which neither prices nor wages adjust instantaneously and lump-sum taxes are unavailable as a source of government finance. We then propose that monetar and fiscal policy should be coordinated to satisfy a pair of simple...
Persistent link: https://www.econbiz.de/10005807908
By setting bounds on money growth, the commodity standard is a solution to the monetary authority’s time inconsistency problem, which arises from the fixed wage structure of the economy. If there is a supply shock to the backing commodity, the suspension of the commodity standard may be...
Persistent link: https://www.econbiz.de/10005807909
At present, the enhanced HIPC initiative and the Gleneagles Proposal for debt write-downs by the G8 are the main mechanisms used to reduce indebtedness of low-income countries. In these countries where poor governance is a key issue, it is naïve to believe that the Millennium Development Goals...
Persistent link: https://www.econbiz.de/10005807910
An investigation into the legal and political history of South Sea Company subscription finance shows that the subscription contracts had default options built into them, as was typically the case in eighteenth-century subscription financing. Company records and contemporary pamphlet literature...
Persistent link: https://www.econbiz.de/10005807911
By imposing a simple adjustment cost on gold purchases the Bank of England was able to manage external drains of monetary gold while maintaining the convertibility of pound during the eighteenth century. This was a period during which constant political disturbances and external shocks on the...
Persistent link: https://www.econbiz.de/10005807912
We examine the impact of tax policy uncertainty on the irreversible investment decisions of a monopolistically competitive firm. We consider the impact of tax policy in terms of the investment tax credit (ITC) as well as the stochastic tax wedge which determines the after-tax costs of investing....
Persistent link: https://www.econbiz.de/10005807913
We develop a simple and intuitive approach for analytically deriving unconditionally optimal (UO) policies, a topic of enduring interest in optimal monetary policy analysis. The approach can be employed to both general linear-quadratic problems and to the underlying non-linear environments. We...
Persistent link: https://www.econbiz.de/10005807914