Journal of Economic Dynamics and Control
Опубликовано на портале: 17-12-2007G.C. Lim, Paul D. McNelis Journal of Economic Dynamics and Control. 2007. Vol. 31. No. 11. P. 3699-3722.
This paper examines the welfare implications of managing asset-price with consumer-price inflation targeting by monetary authorities who have to learn the laws of motion for both inflation rates. The central bank can reduce the volatility of consumption as well as improve welfare more effectively if it adopts state-contingent Taylor rules aimed at inflation and Q-growth targets in this learning environment. However, under perfect model certainty, pure inflation targeting dominates combined consumer and asset-price inflation targeting.
Опубликовано на портале: 16-12-2007Bartosz Maćkowiak Journal of Economic Dynamics and Control. 2007. Vol. 31. No. 10. P. 3321-3347.
This paper explains a currency crisis as an outcome of a switch in how monetary policy and fiscal policy are coordinated. The paper develops a model of an open economy in which monetary policy starts active, fiscal policy starts passive and, in a particular state of nature, monetary policy switches to passive and fiscal policy switches to active. The probability of the regime switch is endogenous and changes over time together with the state of the economy. The regime switch is preceded by a sharp increase in interest rates and causes a jump in the exchange rate. The model predicts that currency composition of public debt affects dynamics of macroeconomic variables. Furthermore, the model is consistent with evidence from recent currency crises, in particular small seigniorage revenues.
Опубликовано на портале: 17-12-2007Giuseppe Ferrero Journal of Economic Dynamics and Control. 2007. Vol. 31. No. 9. P. 3006-3041.
Under the assumption of bounded rationality, economic agents learn from their past mistaken predictions by combining new and old information to form new beliefs. The purpose of this paper is to investigate how the policy-maker, by affecting private agents’ learning process, determines the speed at which the economy converges to the rational expectation equilibrium. I find that by reacting strongly to private agents’ expected inflation, a central bank increases the speed of convergence and shortens the length of the transition to the rational expectation equilibrium. I use speed of convergence as an additional criterion for evaluating alternative monetary policies. I find that a fast convergence is not always desirable.
Опубликовано на портале: 18-11-2007Ester Faia, Tommaso Monacelli Journal of Economic Dynamics and Control. 2007. Vol. 31. No. 10. P. 3228-3254.
We study optimal Taylor-type interest rate rules in an economy with credit market imperfections. Our analysis builds on the agency cost framework of Carlstrom and Fuerst [1997. Agency costs, net worth and business fluctuations: a computable general equilibrium analysis. American Economic Review 87, 893–910], which we extend in two directions. First, we embed monopolistic competition and sticky prices. Second, we modify the stochastic structure of the model in order to generate a countercyclical premium on external finance. This is achieved by linking the mean distribution of investment opportunities faced by entrepreneurs to aggregate total factor productivity. We model monetary policy in terms of simple welfare-maximizing interest rate rules. We find that monetary policy should respond to increases in asset prices by lowering interest rates. However, when monetary policy responds strongly to inflation, the marginal welfare gain of responding to asset prices vanishes. Within the class of linear interest rate rules that we analyze, a strong anti-inflationary stance always attains the highest level of welfare.