Systematic Monetary Policy and the Effects of Oil Price Shocks
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Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Zbaracki, Mark J.; Ritson, Mark; Levy, Daniel; Dutta, Shantanu; Bergen, Mark Article — Accepted Manuscript (Postprint) Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets Review of Economics and Statistics Suggested Citation: Zbaracki, Mark J.; Ritson, Mark; Levy, Daniel; Dutta, Shantanu; Bergen, Mark (2004) : Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets, Review of Economics and Statistics, ISSN 1530-9142, MIT Press, Cambridge, MA, Vol. 86, Iss. 2, pp. 514-533, http://dx.doi.org/10.1162/003465304323031085 , https://www.mitpressjournals.org/doi/abs/10.1162/003465304323031085?journalCode=rest This Version is available at: http://hdl.handle.net/10419/206841 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. -
A Macroeconomic Model with Financial Panics Gertler, Mark, Nobuhiro Kiyotaki, and Andrea Prestipino
K.7 A Macroeconomic Model with Financial Panics Gertler, Mark, Nobuhiro Kiyotaki, and Andrea Prestipino Please cite paper as: Gertler, Mark, Nobuhior Kiyotaki, and Andrea Prestipino (2017). A Macroeconomic Model with Financial Panics. International Finance Discussion Papers 1219. https://doi.org/10.17016/IFDP.2017.1219 International Finance Discussion Papers Board of Governors of the Federal Reserve System Number 1219 December 2017 Board of Governors of the Federal Reserve System International Finance Discussion Papers Number 1219 December 2017 A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki and Andrea Prestipino NOTE: International Finance Discussion Papers are preliminary materials circulated to stimulate discussion and critical comment. References to International Finance Discussion Papers (other than an acknowledgment that the writer has had access to unpublished material) should be cleared with the author or authors. Recent IFDPs are available on the Web at www.federalreserve.gov/pubs/ifdp/. This paper can be downloaded without charge from the Social Science Research Network electronic library at www.ssrn.com. A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki and Andrea Prestipino NYU, Princeton and Federal Reserve Board December, 2017 Abstract This paper incorporates banks and banking panics within a conven- tional macroeconomic framework to analyze the dynamics of a financial crisis of the kind recently experienced. We are particularly interested in characterizing the sudden and discrete nature of the banking panics as well as the circumstances that makes an economy vulnerable to such panics in some instances but not in others. Having a conventional macroeconomic model allows us to study the channels by which the crisis a¤ects real activity and the e¤ects of policies in containing crises. -
Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory*
MONETARY POLICY RULES AND MACROECONOMIC STABILITY: EVIDENCE AND SOME THEORY* RICHARD CLARIDA JORDI GALI´ MARK GERTLER We estimate a forward-looking monetary policy reaction function for the postwar United States economy, before and after Volcker’s appointment as Fed Chairman in 1979. Our results point to substantial differences in the estimated rule across periods. In particular, interest rate policy in the Volcker-Greenspan period appears to have been much more sensitive to changes in expected ination than in the pre-Volcker period. We then compare some of the implications of the estimated rules for the equilibrium properties of ination and output, using a simple macroeconomic model, and show that the Volcker-Greenspan rule is stabilizing. I. INTRODUCTION From the late 1960s through the early 1980s, the United States economy experienced high and volatile ination along with several severe recessions. Since the early 1980s, however, ina- tion has remained steadily low, while output growth has been relatively stable. Many economists cite supply shocks—and oil price shocks, in particular—as the main force underlying the instability of the earlier period. It is unlikely, however, that supply shocks alone could account for the observed differences between the two eras. For example, while jumps in the price of oil might help explain transitory periods of sharp increases in the general price level, it is not clear how they alone could explain persistent high ination in the absence of an accommodating monetary policy.1 Furthermore, as De Long {1997} argues, the onset of sustained high ination occurred prior to the oil crisis episodes. * We thank seminar participants at Universitat Pompeu Fabra, New York University, the Board of Governors of the Federal Reserve System, University of Maryland, NBER Summer Institute, Universite´ de Toulouse, Bank of Spain, Harvard University, Bank of Mexico, Universitat de Girona, and the Federal Reserve Banks of Atlanta, New York, Richmond, Dallas, and Philadelphia, as well as two anonymous referees and two editors for useful comments. -
The Robustness and Efficiency of Monetary Policy Rules As Guidelines
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Taylor, John B. Working Paper The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European Central Bank: Conference on Monetary Policy Rules, Stockholm 12 - 12 June 1998 Sveriges Riksbank Working Paper Series, No. 58 Provided in Cooperation with: Central Bank of Sweden, Stockholm Suggested Citation: Taylor, John B. (1998) : The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European Central Bank: Conference on Monetary Policy Rules, Stockholm 12 - 12 June 1998, Sveriges Riksbank Working Paper Series, No. 58, Sveriges Riksbank, Stockholm This Version is available at: http://hdl.handle.net/10419/83027 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. -
Happiness, Contentment and Other Emotions for Central Banks
NBER WORKING PAPER SERIES HAPPINESS, CONTENTMENT AND OTHER EMOTIONS FOR CENTRAL BANKS Rafael Di Tella Robert MacCulloch Working Paper 13622 http://www.nber.org/papers/w13622 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 November 2007 This paper was prepared for the Federal Reserve Bank of Boston, “Implications of Behavioral Economics for Economic Policy” conference, September 27-28th, 2007. For very helpful comments and discussions, we thank our commentators, Greg Mankiw and Alan Krueger, as well as conference participants, Huw Pill, John Helliwell, Sebastian Galiani, Rawi Abdelal, and Julio Rotemberg. We thank Jorge Albanesi for excellent research assistance. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. © 2007 by Rafael Di Tella and Robert MacCulloch. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Happiness, Contentment and Other Emotions for Central Banks Rafael Di Tella and Robert MacCulloch NBER Working Paper No. 13622 November 2007 JEL No. E0,E58,H0 ABSTRACT We show that data on satisfaction with life from over 600,000 Europeans are negatively correlated with the unemployment rate and the inflation rate. Our preferred interpretation is that this shows that emotions are affected by macroeconomic fluctuations. Contentment is, at a minimum, one of the important emotions that central banks should focus on. More ambitiously, contentment might be considered one of the components of utility. The results may help central banks understand the tradeoffs that the public is willing to accept in terms of unemployment for inflation, at least in terms of keeping the average level of one particular emotion (contentment) constant. -
Monetary Policy in the New Neoclassical Synthesis: a Primer
View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Research Papers in Economics Monetary Policy in the New Neoclassical Synthesis: A Primer Marvin Goodfriend reat progress was made in the theory of monetary policy in the last quarter century. Theory advanced on both the classical and the Keynesian sides. New classical economists emphasized the G 1 importance of intertemporal optimization and rational expectations. Real business cycle (RBC) theorists explored the role of productivity shocks in models where monetary policy has relatively little effect on employment and output.2 Keynesian economists emphasized the role of monopolistic competition, markups, and costly price adjustment in models where mon- etary policy is central to macroeconomic fluctuations.3 The new neoclas- sical synthesis (NNS) incorporates elements from both the classical and the Keynesian perspectives into a single framework.4 This “primer” provides an in- troduction to the benchmark NNS macromodel and its recommendations for monetary policy. The author is Senior Vice President and Policy Advisor. This article origi- nally appeared in International Finance (Summer 2002, 165–191) and is reprinted in its entirety with the kind permission of Blackwell Publishing [http://www.blackwell- synergy.com/rd.asp?code=infi&goto=journal]. The article was prepared for a conference, “Stabi- lizing the Economy: What Roles for Fiscal and Monetary Policy?” at the Council on Foreign Relations in New York, July 2002. The author thanks Al Broaddus, Huberto Ennis, Mark Gertler, Robert Hetzel, Andreas Hornstein, Bennett McCallum, Adam Posen, and Paul Romer for valuable comments. Thanks are also due to students at the GSB University of Chicago, the GSB Stanford University, and the University of Virginia who saw earlier versions of this work and helped to improve the exposition. -
Finance and Growth: When Credit Helps, and When It Hinders
Session “Socially Useful Financial Systems” Bezemer – ‘When Credit Helps, and When it Hinders’ Finance and Growth: When Credit Helps, and When it Hinders Dirk J Bezemer, University Groningen ([email protected] ) EXTENDED SUMMARY The financial sector can support growth but it can also cause crisis. The present crisis has exposed gaps in economists’ understanding of this dual potential. This paper grounds an alternative approach in the credit nature of money, and in an older distinction between credit flows that grow the economy of goods and services (the GDP), and credit that inflates markets for financial assets and property. This increases the debt-to-GDP ratio and can be a helpful catalyst of the real sector. But if it overshoots, it leads to bloated financial markets and the pursuit of capital gains rather than profit, with rising costs due to high asset values, rising inequality, falling fixed capital formation, rising uncertainty, and fraud and corruption. Unfortunately, overshooting is built into the system due to the nature of money, banking and compound interest. That is why financial deregulation leads to credit booms and busts. A return to financially sustainable growth in the longer term requires a shrinking of the mortgage, consumer credit and nonbank financial sector which is a creditor to the real sector, and absorbs a continuing flow of liquidity in interest payment and financial fees that would otherwise be effective demand for goods and services, supporting economic growth. Financial deregulation has allowed the US ‘FIRE’ sector to grow to about three times the size it had in the 1980s and so its claims on the real sector are three times larger than a quarter century ago. -
Mark Gertler Becomes Newest Resident Scholar
Federal Reserve Bank of New York Number 2 2006 ResearchUpdate Research and Statistics Group www.newyorkfed.org/research Mark Gertler Becomes Newest Resident Scholar he Research Group welcomes Mark and has been a visiting scholar at the Gertler to its Program for Resident Federal Reserve Bank of New York on T Scholars for 2006-07. and off since 1994. Professor Gertler, the Henry and Lucy Professor Gertler joins current resident Moses Professor of Economics at NYU scholars Nobuhiro Kiyotaki of the London and Chair of the Economics Department, School of Economics and Suresh M. is known for his research on macroeco- Sundaresan of Columbia Business School. nomic theory, monetary economics, and The Research Group established its finance. He has published extensively, Program for Resident Scholars in 2004 coauthoring with Ben Bernanke, Glenn to attract to the New York Fed, for a stay Hubbard, and Mark Watson, and his work of at least six months, outstanding has appeared in the American Economic researchers with an international reputa- Review, the Journal of Political Economy, tion. The scholars are selected from the the Quarterly Journal of Economics, and top academic and policy institutions in the Review of Economic Studies. areas related to the Bank’s broad policy Professor Gertler has a distinguished career in academia. He is also a coeditor interests. Resident scholars pursue their of the American Economic Review and own research agendas while participating has been on the editorial boards of the fully in the Group’s activities. They work Journal of Money, Credit, and Banking; closely with the director of research, con- Economics Letters; the NBER tribute to policymaking discussions, and Macroeconomics Annual; and the Journal provide intellectual leadership by advising of Financial Intermediation. -
Working Paper No
Working Paper No. 384 Minsky's Acceleration Channel and the Role of Money by Greg Hannsgen The Levy Economics Institute of Bard College July 2003 Address for correspondence: G. Hannsgen The Levy Economics Institute of Bard College Blithewood Annandale-on-Hudson, N.Y. 12504-5000 U.S.A. Phone: (845) 758-7721 email: [email protected] The author wishes to thank Philip Arestis for extensive and useful comments on earlier drafts and Steve Fazzari for helpful advice at the outset of the project. He thanks Kenneth Hannsgen and Greg Colman for comments on the second draft and Hannsgen for a calculation as indicated in a footnote below. These individuals are not responsible for any remaining errors. 1. INTRODUCTION Fifteen to twenty years after the endogenous supply of money became a cornerstone of post-Keynesian economics (Moore 1979, 1988a, 1988b; Rousseas, 1986; Wray 1990; Kaldor 1970, 1985), the ways in which monetary policy affects the economy are not yet widely agreed upon by heterodox economists (see, for example, Rogers 1989; Davidson 2002, ch. 7). This issue has taken on a new urgency as efforts to stimulate the economy through monetary policy are failing in Japan and having little effect in the United States (Belson 2003) . In the simplest version of the post-Keynesian view, banks are price setters (or rather, interest rate setters) and quantity takers; that is, they are free to set the interest rate at which they provide loans, but have no control over the volume of their lending. Hence, most post-Keynesian innovators of monetary endogeneity attribute the effects of monetary conditions almost entirely to the level of the central bank-determined interest rate, which is marked up by commercial banks to obtain an appropriate lending rate. -
References Amato, Jeffrey V., and Hyun Song Shin, 2003
- 25 - References Amato, Jeffrey V., and Hyun Song Shin, 2003, “Public and private information in monetary policy models” BIS Working Papers, forthcoming (Basel: Bank of International Settlements). Ball, Laurence, 2000, “Near-Rationality and Inflation in Two Monetary Regimes,” NBER Working Paper 7988 (Cambridge, Mass.: National Bureau of Economic Research). ———, 1995, “Disinflation and Imperfect Credibility,” Journal of Monetary Economics, Vol. 35, pp. 5–24. Barro, Robert, and David Gordon, 1983, “Rules, Discretion, and Reputation in a Model of Monetary Policy,” Journal of Monetary Economics, Vol. 12, pp. 101–21. Bayoumi, Tamim, and Silvia Sgherri, 2003, “Deconstructing the Art of Central Banking,” forthcoming IMF Working Paper (Washington: International Monetary Fund). Blanchard, Olivier, and John Simon, 2001, “The Long and Large Decline in U.S. Output Volatility,” Brookings Papers on Economic Activity I, pp. 135–64. (Washington: Brookings Institution). Boivin, Jean, and Marc Giannoni, 2002, “Assessing Changes in the Monetary Transmission Mechanism: A VAR Approach”, Federal Reserve Bank of New York Economic Policy Review, Vol 8, pp. 97-111. Buiter, W., and Jewitt, I., 1989, “Staggered Wage Setting and Relative Wage Rigidities: Variations on a Theme of Taylor,” Reprinted in: Macroeconomic Theory and Stabilization Policy, edited by W. Buiter (University of Michigan Press, Ann Arbor), pp. 183–99. Calvo, Guillermo A., 1983, “Staggered Prices in a Utility Maximizing Framework,” Journal of Monetary Economics, Vol. 12, pp. 383–88. Christiano, Lawrence J., and Cristopher Gust, 2000, “The Expectations Trap Hypothesis,” Federal Reserve Bank of Chicago Economic Perspectives, Vol. 24, pp. 21–39. Clarida, Richard, Jordi Galí, and Mark Gertler, 1998, “Monetary Policy Rules In Practice: Some International Evidence,” European Economic Review, pp. -
June 2020 Ph.D., Columbia University, New York, 1988. Advisor
June 2020 CARMEN M. REINHART CURRICULUM VITAE EDUCATION Ph.D., Columbia University, New York, 1988. Advisor: Robert Mundell. Doctoral Dissertation: “Real Exchange Rates, Commodity Prices, and Policy Interdependence.” M. Phil., 1981 and M.A., Columbia University, New York, 1980. B.A., Florida International University, Miami, 1978. PROFESSIONAL POSITIONS Chief Economist and Vice President, World Bank, Washington DC, June 2020- Minos A. Zombanakis Professor of the International Financial System, Harvard Kennedy School, July 2012 – Dennis Weatherstone Chair, Peterson Institute for International Economics, Washington DC, 2011 – June 2012. Director, Center for International Economics, 2009-2010; Professor, School of Public Policy and Department of Economics, 2000 – 2010; Director, International Security and Economic Policy Specialization, 1998 – 2001; Associate Professor School of Public Policy, University of Maryland, 1996 – 2000. Senior Policy Advisor and Deputy Director, Research Department, 2001 – 2003. Senior Economist and Economist, 1988 - 1996, International Monetary Fund. Chief Economist and Vice President, 1985 – 1986; Economist, March 1982 - 1984, Bear Stearns, New York. AWARDS AND HONORS Karl Brunner Award, Swiss National Bank, planned September 2021. Mundell-Fleming Lecture, International Monetary Fund, planned November 2020. Economica, Coase-Phillips Lecture, London School of Economics, London, May 2020. FIMEF Diamond Finance Award, Instituto Mexicano de Ejecutivos de Finanzas, Mexico, August 2019. Homer Jones Memorial Lecture, St. Louis Federal Reserve, July 2019. Thomas Schelling Lecture, University of Maryland, April 2019. Carmen M. Reinhart Pa ge 1 King Juan Carlos Prize in Economics, December 2018. Wiki. Bernhard Harms Prize, Kiel Institute for the World Economy. October 2018. Adam Smith Award, National Association of Business Economists, September 2018. William F. Butler Award, New York Association for Business Economists, September 2017. -
The Financial Accelerator in a Quantitative Business Cycle Framework*
Chapter 21 THE FINANCIAL ACCELERATOR IN A QUANTITATIVE BUSINESS CYCLE FRAMEWORK* BEN S. BERNANKE, MARK GERTLER and SIMON GILCHRIST Princeton University, New York University, and Boston Unicersity** Contents Abstract 1342 Keywords 1342 1. Introduction 1343 2. The model: overview and basic assumptions 1346 3. The demand for capital and the role of net worth 1349 3.1. Contract terms when there is no aggregate risk 1350 3.2. Contract terms when there is aggregate risk 1352 3.3. Net worth and the optimal choice of capital 1352 4. General equilibrium 1355 4.1. The entrepreneurial sector 1356 4.2. The complete log-linearized model 1360 4.2.1. Two extensions of the baseline model 1365 4.2.1.1. Investment delays 1365 4.2.1,2. Heterogeneous firms 1366 5. Model simulations 1367 5.1. Model parametrization 1367 5.2. Results 1368 5.2.1. Response to a monetary policy shock 1368 5.2.2. Shock to technology, demand, and wealth 1372 5.2.3. Investment delays and heterogeneous firms 1373 6. A highly selected review of the literature 1375 7. Directions for furore work 1379 Appendix A. The optimal financial contract and the demand for capital 1380 A. 1. The partial equilibrium contracting problem 1380 A.2. The log-normal distribution 1385 A.3. Aggregate risk 1385 * Thanks to Michael Woodford, Don Morgan and John Taylor for helpful conanents, and to the NSF and C.M Starr Center for financial support. ** Each author is also affiliated with the National Bmeau of Economic Research. Handbook of Macroeconomics, Volume 1, Edited by J..B.