730 research outputs found
Monetary Policy and Foreign Price Disturbances Under Flexible Exchange Rates: A Stochastic Approach
No full textTurnovsky, Stephen J.. (1979). Monetary Policy and Foreign Price Disturbances Under Flexible Exchange Rates: A Stochastic Approach. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/55011
The Analysis of Macroeconomic Policies in Perfect Foresight Equilibrium
No full textBrock, William A.; Turnovsky, Stephen J.. (1979). The Analysis of Macroeconomic Policies in Perfect Foresight Equilibrium. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/55014
Data for: International Financial Integration, Volatility, and Income Inequality in a Stochastically Growing Economy
No full textMathematica files used for simulation
Covered Interest Parity, Uncovered Interest Parity, and Exchange Rate Dynamics
No full textA number of macroeconomic models of open economies under flexible exchange rate assume a strong version of perfect capital mobility which implies that currency speculation commands no risk premium. If this assumption is dropped a number of important results no longer obtain. First, the exchange rate and interest rate cannot be in steady state unless both the government deficit and current account equal zero, not simply their sum, as would otherwise be the case. Second, even in steady state the domestic interest rate can deviate from the foreign interest rate by an amount which de ends upon relative domestic asset supplies. Finally, introducing risk aversion on the part of speculators can reduce the response on impact of the exchange rate to changes in domestic asset supplies. In this sense rational speculators, if they are less risk averse than other agents, can destabilize exchange markets.
An Analysis of the Stabilizing and Welfare Effects of Intervention in Spot and Futures Markets
No full textThis paper analyzes the effects of three alternative rules on the long-run distributions of both the spot and futures prices ina single commodity market, in which the key behavioral relationships are derived from the optimizing behavior of producers and speculators.The rules considered include: (i) leaning against the wind in the spot market; (ii) utility maximizing speculative behavior by the stabilization authority in the futures market; (iii) leaning against the wind in the futures market. Since the underlying model is sufficiently complex to preclude analytical solutions, the analysis makes extensive use of simulation methods. As a general proposition we find that intervention in the futures market is not as effective in stabilizing either the spot price of the futures price as is intervention in the spot market. Indeed, Rule (iii), while stabilizing the futures price may actually destabilize the spot price. Furthermore, the analogous type of rule undertaken in the spot market will always stabilize the futures price to a greater degree than it does the spot price. The welfare implications of these rules are also discussed. Our analysis shows how these can generate rather different distributions of welfare gains, including the overall benefits.
Optimal Monetary Policy and Wage Indexation Under Alternative Disturbances and Information Structures
No full textThe interdependence between the optimal degree of wage indexation and optimal monetary policy is analyzed for a small open economy under a variety of assumptions regarding: (i) relative information available to private agents and the stabilization authority; (ii) the perceived nature of the disturbances impinging on the economy. The distinctions between: (a) unanticipated and anticipated disturbances, and (b) permanent and transitory disturbances, are emphasized. The extent to which stabilization is achieved is shown to depend upon the nature of the disturbances and the available information. The policy redundancy issue is emphasized, implying that optimal rules can frequently be specified in many equivalent ways.
Essays on International Demographic Economics
No full textThesis (Ph.D.)--University of Washington, 2016-03This dissertation focuses on including realistic demographic structures in macroeconomic frameworks in order to circumvent existing modeling issues, explain current international trends, and forecast the implications of new social policies. The first chapter covers the closure of the small open economy model and a comparison of demographic structures. Closing the small open economy model has been a stumbling block in studying the dynamic implications of such models since the typical procedure of equating the after-tax return on traded bonds to the rate of time preference involves imposing constraining knife-edge conditions. This paper replaces the infinitely-lived representative agent framework with a plausible demographic structure. This yields a well-behaved macrodynamic equilibrium without imposing any knife-edge conditions. The second chapter develops a two-country overlapping generations neoclassical growth model including a realistic demographic structure for the purpose of analyzing the impact of country-level asymmetries in demographic and structural characteristics on cross-country interdependence. I find that an increase in the relative life expectancy of a population will produce a positive per-capita net foreign asset position. Furthermore, I demonstrate how cross-country differences in the rate of time preference will augment the decline of the American net foreign asset position generated by the demographic transition. Lastly, I present how an adjustment in the pension benefit of a pay-as-you-go social security structure will induce a change in the simulated net foreign asset position. Lastly, in the third chapter, I develop a modified version of the Mierau and Turnovsky (2015) model to determine the impact of the reversal of China’s state fertility policy commonly known as the “one-child policy”. In order to estimate the impact of the policy reversal on the labor market, I forecast the survival function forward 20 years to determine the old-age dependency rate. I augment the analysis by including a simulation estimating the impact of the proposed 5-year extension of the retirement age. From this analysis I develop two key results. The first is that the government will be forced to reduce the national pension benefit by 2.85 percent if they continue with their established policies. The second is that the proposed 5 year retirement age extension will be sufficient to keep the pension system solvent during the demographic transitio
"Growth in an open economy: some recent developments"
No full textThis paper discusses some of the recent developments in growth theory, doing so from the perspective of a small open economy. After setting out a basic generic model, we show how it may yield two of the key models that have played a prominent role in the recent literature, the endogenous growth model and the non-scale growth model. We focus initially on the former, emphasizing how the simplest such model leads to an equilibrium in which the economy is always on its balanced growth path. One aspect of the model is the importance of fiscal policy as a determinant of the equilibrium growth rate, an aspect that is discussed in detail. We also show how the endogeneity or otherwise of the labor supply is crucial in determining the equilibrium growth rate and its responsiveness to macroeconomic policy. But transitional dynamics are an important aspect of the growth process and indeed much research has been directed to determining the speed with which the economy converges to its balanced growth path. We discuss alternative ways that such transitional dynamics may be introduced. These include (i) restricted access to the world capital market; (ii) the introduction of government capital , and (iii) the two-sector production model, pioneered by Lucas. In the original analysis, the two capital goods relate to physical and human capital and in the international context these naturally can be identified with traded and nontraded capital, respectively. Criticism of the endogenous growth model has led to the development of the nonscale growth model. This too is characterized by transitional dynamics, which are more flexible than those of the corresponding endogenous growth model. This model is much closer to the neoclassical model; in particular, the long-run growth rate is independent of macroeconomic policy. However, since such models are typically associated with slow convergence speeds, policy can influence the accumulation of capital for extended periods of time, leading to significant long-run level effects. The discussion seeks to emphasize the adaptability of the models to a wide range of issues. A final extension addresses the impact of volatililty on growth. This has been extensively analyzed empirically and a stochastic extension of the endogenous growth model provides a convenient framework within which to interpret this research
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