Staff ReportPub Date : 2017-10-24DOI: 10.21034/sr.557
Luigi Bocola, G. Lorenzoni
{"title":"Financial Crises and Lending of Last Resort in Open Economies","authors":"Luigi Bocola, G. Lorenzoni","doi":"10.21034/sr.557","DOIUrl":"https://doi.org/10.21034/sr.557","url":null,"abstract":"We study financial panics in a small open economy with floating exchange rates. In our model, bank runs trigger a decline in domestic wealth and a currency depreciation. Runs are more likely when banks have dollar debt. Dollar debt emerges endogenously in response to the precautionary motive of domestic savers: dollar savings provide insurance against crises; so when crises are possible it becomes relatively more expensive for banks to borrow in local currency, which gives them an incentive to issue dollar debt. This feedback between aggregate risk and savers? behavior can generate multiple equilibria, with the bad equilibrium characterized by financial dollarization and the possibility of bank runs. A domestic lender of last resort can eliminate the bad equilibrium, but interventions need to be fiscally credible. Holding foreign currency reserves hedges the fiscal position of the government and enhances its credibility, thus improving financial stability.","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115115975","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staff ReportPub Date : 2017-08-31DOI: 10.21034/sr.554
F. Perri, G. Stefanidis
{"title":"Capital Requirements and Bailouts","authors":"F. Perri, G. Stefanidis","doi":"10.21034/sr.554","DOIUrl":"https://doi.org/10.21034/sr.554","url":null,"abstract":"We use balance sheet data and stock market data for the major U.S. banking institutions during and after the 2007-8 financial crisis to estimate the magnitude of the losses experienced by these institutions because of the crisis. We then use these estimates to assess the impact of the crisis under alternative, and higher, capital requirements. We find that substantially higher capital requirements (in the 20% to 30% range) would have substantially reduced the vulnerability of these financial institutions, and consequently they would have significantly reduced the need of a public bailout.","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"229 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-08-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132493732","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staff ReportPub Date : 2017-06-08DOI: 10.21034/sr.530
E. Prescott, R. Wessel
{"title":"Fiat Value in the Theory of Value","authors":"E. Prescott, R. Wessel","doi":"10.21034/sr.530","DOIUrl":"https://doi.org/10.21034/sr.530","url":null,"abstract":"We explore monetary policy in a world without currency. In our world, money is a form of government debt that bears interest, which can be negative as well as positive. Services of money are a factor of production. We show that the national accounts must be revised in this world. Using our baseline economy, we determine the balanced growth paths for a set of money interest rate target policy regimes. Besides this interest rate, the only policy variable that differs across regimes is either the labor income tax rate or the inflation rate. We find that Friedman monetary satiation without deflation is possible. We also examine a set of inflation rate targeting regimes. Here, the only other policy variable that differs across policy regimes is the tax rate. There is a sequence of markets with outcome in each market being a Debreu valuation equilibrium, which determines the vector of assets and liabilities households take into the subsequent period. Evaluating a policy regime is an advanced exercise in public finance. Monetary satiation is not optimal even though money is costless to produce.","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"92 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-06-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128346288","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staff ReportPub Date : 2017-02-10DOI: 10.21034/sr.588
Luca Benati, R. Lucas, J. Nicolini, Warren E. Weber
{"title":"Online Appendix for: International Evidence on Long-Run Money Demand","authors":"Luca Benati, R. Lucas, J. Nicolini, Warren E. Weber","doi":"10.21034/sr.588","DOIUrl":"https://doi.org/10.21034/sr.588","url":null,"abstract":"This appendix supports Staff Report 587. An earlier version of this Staff Report circulated as Working Paper 738.","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133746787","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staff ReportPub Date : 2017-01-24DOI: 10.21034/sr.539
Doireann Fitzgerald, S. Haller, yaniv yedid-levi
{"title":"Appendix for How Exporters Grow","authors":"Doireann Fitzgerald, S. Haller, yaniv yedid-levi","doi":"10.21034/sr.539","DOIUrl":"https://doi.org/10.21034/sr.539","url":null,"abstract":"","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"92 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-01-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127054862","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staff ReportPub Date : 2017-01-24DOI: 10.21034/sr.538
C. Arellano, Yan Bai, P. Kehoe
{"title":"Appendix for Financial Frictions and Fluctuations in Volatility","authors":"C. Arellano, Yan Bai, P. Kehoe","doi":"10.21034/sr.538","DOIUrl":"https://doi.org/10.21034/sr.538","url":null,"abstract":"This appendix contains five sections. Section 1 provides details for the comparative statics exercise performed in the simple example. Section 2 discusses extending the model to allow firms to default on the wages for managers. Section 3 describes the firm-level and aggregate data. Section 4 contains the details of the computational algorithm. Finally, Section 5 reports the results for our model with a lower labor elasticity.","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-01-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127588607","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staff ReportPub Date : 2016-10-14DOI: 10.2139/SSRN.2537559
R. Koijen, Motohiro Yogo
{"title":"An Equilibrium Model of Institutional Demand and Asset Prices","authors":"R. Koijen, Motohiro Yogo","doi":"10.2139/SSRN.2537559","DOIUrl":"https://doi.org/10.2139/SSRN.2537559","url":null,"abstract":"We develop an asset pricing model with rich heterogeneity in asset demand across investors, designed to match institutional holdings. The equilibrium price vector is uniquely determined by market clearing across institutional investors and households. We relate the model to Euler equations, mean-variance portfolio choice, factor models, and cross-sectional regressions on characteristics. We propose an instrumental variables estimator for the asset demand system to address the endogeneity of institutional demand and asset prices. Using U.S. stock market data, we illustrate how our approach could be used to understand the role of institutions in asset market movements, volatility, and predictability.","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"224 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124465091","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staff ReportPub Date : 2015-12-18DOI: 10.21034/sr.522
R. Chahrour, Luminita Stevens
{"title":"Equilibrium Price Dispersion and the Border Effect","authors":"R. Chahrour, Luminita Stevens","doi":"10.21034/sr.522","DOIUrl":"https://doi.org/10.21034/sr.522","url":null,"abstract":"We develop a model of equilibrium price dispersion via retailer search and show that the degree of market segmentation within and across countries cannot be separately identified by good-level price data alone. We augment a set of well-known empirical facts about the failure of the law of one price with data on aggregate intranational and international trade quantities, and calibrate the model to match price and quantity facts simultaneously. The calibrated model matches the data very well and implies that within-country markets are strongly segmented, while international borders contribute virtually no additional market segmentation.","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125198215","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staff ReportPub Date : 2015-10-31DOI: 10.21034/sr.519
Benjamin Bridgman, Shi Qi, James A. Schmitz
{"title":"Cartels Destroy Productivity: Evidence from the New Deal Sugar Manufacturing Cartel, 1934-74*","authors":"Benjamin Bridgman, Shi Qi, James A. Schmitz","doi":"10.21034/sr.519","DOIUrl":"https://doi.org/10.21034/sr.519","url":null,"abstract":"The idea that cartels might reduce industry productivity by misallocating production from high to low productivity producers is as old as Adam. However, the study of the economic consequences of cartels has almost exclusively focused on the losses from higher prices (i.e., Harberger triangles). Yet, as the old idea suggests, we show that the rules for quotas and side payments in the New Deal sugar cartel led to significant misallocation of production. The resulting productivity declines essentially destroyed the entire cartel profit. The magnitude of the deadweight losses (relative to value added) was large: we estimate a lower bound for the losses equal to 25 percent and 42 percent in the beet and cane industries, respecttively.","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114794060","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staff ReportPub Date : 2015-03-27DOI: 10.21034/wp.715
Erzo G. J. Luttmer
{"title":"An Assignment Model of Knowledge Diffusion and Income Inequality","authors":"Erzo G. J. Luttmer","doi":"10.21034/wp.715","DOIUrl":"https://doi.org/10.21034/wp.715","url":null,"abstract":"Randomness in individual discovery disperses productivities, whereas learning from others keeps productivities together. Long-run growth and persistent earnings inequality emerge when these two mechanisms for knowledge accumulation are combined. This paper considers an economy in which those with more useful knowledge can teach others, with competitive markets assigning students to teachers. In equilibrium, students with an ability to learn quickly are assigned to teachers with the most productive knowledge. This sorting on ability implies large differences in earnings distributions conditional on ability, as shown using explicit formulas for the tail behavior of these distributions.","PeriodicalId":164493,"journal":{"name":"Staff Report","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-03-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126726273","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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