Occasionally Binding Constraints in Large Models: A Review of Solution Methods Staff Discussion Paper 2021-5 Jonathan Swarbrick Solving macroeconomic models is difficult. One challenge is the occasionally binding constraint of the zero lower bound on nominal interest rates. This paper reviews various ways to solve models that include this feature. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): C, C6
Labor Market Shocks and Monetary Policy Staff Working Paper 2023-52 Serdar Birinci, Fatih Karahan, Yusuf Mercan, Kurt See We develop a heterogeneous-agent New Keynesian model featuring a frictional labor market with on-the-job search to quantitatively study the positive and normative implications of employer-to-employer transitions for inflation. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Inflation and prices, Labour markets, Monetary policy JEL Code(s): E, E1, E12, E2, E24, E5, E52, J, J3, J31, J6, J62, J64
Uninsurable Investment Risks and Capital Income Taxation Staff Working Paper 2009-3 Césaire Meh, Yaz Terajima This paper studies the capital accumulation and welfare implications of reducing capital income taxation in a general equilibrium economy with uninsurable investment risks. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models JEL Code(s): E, E2, E21, E22, E6, E62, G, G3, G32, H, H2, H24, H25
Constrained Efficiency with Adverse Selection and Directed Search Staff Working Paper 2017-15 Mohammad Davoodalhosseini Constrained efficient allocation (CE) is characterized in a model of adverse selection and directed search (Guerrieri, Shimer, and Wright (2010)). CE is defined to be the allocation that maximizes welfare, the ex-ante utility of all agents, subject to the frictions of the environment. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): D, D8, D82, D83, E, E2, E24, G, G1, J, J3, J31, J6, J64
Household Heterogeneity and the Performance of Monetary Policy Frameworks Staff Working Paper 2022-12 Edouard Djeutem, Mario He, Abeer Reza, Yang Zhang Consumption inequality and a low interest rate environment are two important trends in today’s economy. But the implications they may have—and how those implications interact—within different monetary policy frameworks are not well understood. We study the ranking of alternative frameworks that take these trends into account. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Monetary policy and uncertainty, Monetary policy framework, Monetary policy transmission JEL Code(s): D, D3, D31, D5, D52, E, E2, E21, E3, E31, E5, E52, E58
Real Effects of Price Stability with Endogenous Nominal Indexation Staff Working Paper 2009-16 Césaire Meh, Vincenzo Quadrini, Yaz Terajima We study a model with repeated moral hazard where financial contracts are not fully indexed to inflation because nominal prices are observed with delay as in Jovanovic & Ueda (1997). Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial markets, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E2, E21, E3, E31, E4, E44, E5, E52
Dynamic Competition in Negotiated Price Markets Staff Working Paper 2020-22 Jason Allen, Shaoteng Li Repeated interactions between borrowers and lenders create the possibility of dynamic pricing: lenders compete aggressively with low prices to attract new borrowers and then raise their prices once borrowers have made a commitment. We find such pricing patterns in the Canadian mortgage market. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial services, Market structure and pricing JEL Code(s): D, D4, G, G2, G21, L, L2
Aggregate and Welfare Effects of Redistribution of Wealth Under Inflation and Price-Level Targeting Staff Working Paper 2008-31 Césaire Meh, José-Víctor Ríos-Rull, Yaz Terajima Since the work of Doepke and Schneider (2006a) and Meh and Terajima (2008), we know that inflation causes major redistribution of wealth – between households and the government, between nationals and foreigners, and between households within the same country. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Inflation and prices, Inflation targets, Inflation: costs and benefits, Monetary policy framework, Sectoral balance sheet JEL Code(s): D, D3, D31, E, E2, E21, E3, E31, E4, E44, E5, E52, E6, E63
Identification of Random Resource Shares in Collective Households Without Preference Similarity Restrictions Staff Working Paper 2017-45 Geoffrey R. Dunbar, Arthur Lewbel, Krishna Pendakur Resource shares, defined as the fraction of total household spending going to each person in a household, are important for assessing individual material well-being, inequality and poverty. They are difficult to identify because consumption is measured typically at the household level, and many goods are jointly consumed, so that individual-level consumption in multi-person households is not directly observed. Content Type(s): Staff research, Staff working papers Research Topic(s): Domestic demand and components, Econometric and statistical methods JEL Code(s): C, C3, C31, D, D1, D11, D12, D13, I, I3, I32
Monetary Policy Tradeoffs Between Financial Stability and Price Stability Staff Working Paper 2016-49 Malik Shukayev, Alexander Ueberfeldt We analyze the impact of interest rate policy on financial stability in an environment where banks can experience runs on their short-term liabilities, forcing them to sell assets at fire-sale prices. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Monetary policy framework, Monetary policy transmission JEL Code(s): D, D6, D62, E, E3, E32, E4, E44, G, G0, G01