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Economically Sensible Solutions For Linear Rational Expectations Models With Forward And Backward Looking Dynamic Processes
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Book Synopsis Economically Sensible Solutions for Linear Rational Expectations Models with Forward and Backward Looking Dynamic Processes by : Michael Mussa
Download or read book Economically Sensible Solutions for Linear Rational Expectations Models with Forward and Backward Looking Dynamic Processes written by Michael Mussa and published by . This book was released on 1984 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using variants of a modified version of Dornbusch's model of price level and exchange rate dynamics, it is demonstrated that satisfaction of the formal condition for existence of a unigue non-explosive solution of a linear rational expectations model with forward and backward looking dynamic processes (equality of the number of stable roots with the number of independent backward looking processes) does not guarantee the economic sensibility of this solution, even if one accepts the usual arguments for excluding "speculative babbles" from the solutions of such models. Moreover, satisfaction of the formal condition for existence of an infinity of non-explosive solutions for such rational expectations models (more stable roots than independent backward looking processes) does not assure that any of these solutions is economically sensible.
Book Synopsis Rational Expectations Models with a Continuum of Convergent Solutions by : Michael Mussa
Download or read book Rational Expectations Models with a Continuum of Convergent Solutions written by Michael Mussa and published by . This book was released on 1984 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines five examples of rational expectations models with a continuum of convergent solutions and demonstrates serious difficulties in the economic interpretation of these solutions. The five examples are (1) a model of optimal capital accumulation with a negative rate of time preference, (2) Taylor's (1977) linear rational expectations model of macroeconomic equilibrium; (3) Calvo's (1984) model of contract setting and price dynamics; (4) Obstfeld's (1984) equilibrium model of monetary dynamics with individual optimizing agents; and (5) Calvo's (1978) life-cycle model of savings and asset valuation. In every case, when these models yield a continuum of convergent infinite horizon solutions, these solutions fail to exhibit economically appropriate, forward looking dependence of the endogenous variables on the paths of the exogenous forcing variab1es--a difficulty that does not arise under the circumstances where these models yield unique convergent infinite horizon solutions. Further, the three models that have natural finite horizon versions, either lack finite horizon solutions or have solutions that do not converge to any of the infinite horizon solutions. Again, this difficulty arises only under the circumstances where these models have a continuum of infinite horizon solutions.
Book Synopsis Reduced Forms of Rational Expectations Models by : L. Broze
Download or read book Reduced Forms of Rational Expectations Models written by L. Broze and published by Routledge. This book was released on 2013-06-17 with total page 134 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive exposition of rational expectations models is provided here, working up from simple univariate models to more sophisticated multivariate and non-linear models.
Book Synopsis The Forward Method as a Solution Refinement in Rational Expectations Models by : Seonghoon Cho
Download or read book The Forward Method as a Solution Refinement in Rational Expectations Models written by Seonghoon Cho and published by . This book was released on 2008 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper generalizes the standard forward method of recursive substitution to a general class of linear Rational Expectations models with potentially multiple fundamental solutions. We propose a key property embedded in the forward solution -- the no-bubble condition -- as an economically sensible solution refinement in the class of fundamental solutions. In the literature, the no-bubble condition has been assumed to rule out non-fundamental bubble solutions. However, since the condition involves expectations of the future endogenous variables, it must be verified for every Rational Expectations equilibrium. We show that the forward solution is the only fundamental solution satisfying the no-bubble condition and that it is hard to justify economically fundamental solutions violating this condition. We provide several economic examples where the fundamental solutions obtained by other solution methods and refined by other solution selection criteria violate the no-bubble condition.
Author :United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs Publisher : ISBN 13 : Total Pages :138 pages Book Rating :4.F/5 ( download)
Book Synopsis Nominations of H. Robert Heller and Michael L. Mussa by : United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs
Download or read book Nominations of H. Robert Heller and Michael L. Mussa written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs and published by . This book was released on 1986 with total page 138 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Methods of Solution and Simulation for Dynamic Rational Expectations Models by : Olivier J. Blanchard
Download or read book Methods of Solution and Simulation for Dynamic Rational Expectations Models written by Olivier J. Blanchard and published by . This book was released on 1983 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many methods have been proposed for the solution and simulation of medium or large size models under the assumption of rational expectations. The purpose of this paper is to present these methods, and to show how and where each can be applied. The methods fall into two groups. Methods in the first can be used to solve for perfect foresight paths in non-linear models. Methods in the second can be used in linear models, to solve either for paths or processes followed by endogenous variables. All the methods described here have been used in empirical applications and computer algorithms are available for most.
Book Synopsis Commodity Markets and the International Transmission of Fiscal Shocks by : International Monetary Fund
Download or read book Commodity Markets and the International Transmission of Fiscal Shocks written by International Monetary Fund and published by International Monetary Fund. This book was released on 1988-12-06 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Book Synopsis Recursive Solution Methods for Dynamic Linear Rational Expectations Models by : Mark W. Watson
Download or read book Recursive Solution Methods for Dynamic Linear Rational Expectations Models written by Mark W. Watson and published by . This book was released on 1985 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Empirical Tests of Alternative Models of International Growth by : Laurence J. Kotlikoff
Download or read book Empirical Tests of Alternative Models of International Growth written by Laurence J. Kotlikoff and published by . This book was released on 1984 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent changes in patterns of international trade and growth have rekindled interest in the relationships among trade, growth, and the international distribution of income. Three alternative models can serve as a theoretical foundation for an empirical analysis of these relationships. The first is the standard Heckscher-Ohlin-Samuelson (Ho) trade model with equalnumbers of factors and goods and incomplete specialization. The second model allows complete specialization and more goods than factors. The third model posits short run capital immobility. Each of these models has quite different implications for the determination of wage levels and growth rates. The conclusions that we draw from this research are rather mixed. Each of the models perform well on certain criteria and poorly on others. While the standard HO model clearly fails to satisfy certain cross-equation constraints, national endowments are remarkably good predictors of the locus of international production. There are, however, significant nonlinearities in the relationship between factor allocations and national endowments. Such nonlinearities are predicted by the uneven version of the HO model. At odds with both of these models is our finding that lagged values of inputs providean important explanation of current factor demands. Such correlations are suggested by the adjustment cost model.
Book Synopsis Exchange Rate Determination with Systematic and Unsystematic Policy Regime Changes by : John H. Makin
Download or read book Exchange Rate Determination with Systematic and Unsystematic Policy Regime Changes written by John H. Makin and published by . This book was released on 1984 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents results of estimating an exchange rate equation in light of theoretical considerations regarding changes in sterilization and intervention policy and tax policy which imply that the coefficients in the equation will not behave as fixed parameters in a given sample period,as standard econometric practice assumes. We compare the results of ordinary least squares and a random coefficients model of the Japanese Yen-- U.S. dollar exchange rate during the floating period of July 1973 through June 1982.When systematic end of year policy changes affecting Japanese reserves are explicitly modeled, both OLS and the random coefficients model show increased explanatory power. The random coefficients model appears to be superior to OLS however; by allowing the coefficients to vary over time as required by the economic theory discussed above, estimates of the mean response coefficients for the floating period all have the hypothesized sign, and explanatory power is sharply increased.
Book Synopsis Modeling the Term Structure of Interest Rates Under Nonseparable Utility and Durability of Goods by : Kenneth B. Dunn
Download or read book Modeling the Term Structure of Interest Rates Under Nonseparable Utility and Durability of Goods written by Kenneth B. Dunn and published by . This book was released on 1984 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Adjusting the Gross Changes Data by : James M. Poterba
Download or read book Adjusting the Gross Changes Data written by James M. Poterba and published by . This book was released on 1984 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a procedure for adjusting the Current Population Survey gross changes data for the effects of reporting errors. The corrected data suggest that the labor market is much less dynamic than has frequently been suggested. Conventional measures sy understate the duration of unemployment by as much as eighty percent and overstate the extent of movement into and out ofthe labor force by several hundred percent. The adjusted data also throw demographic differences in patterns of labor market dynamics into sharp relief.
Book Synopsis The Causes of Inflation by : Frederic S. Mishkin
Download or read book The Causes of Inflation written by Frederic S. Mishkin and published by . This book was released on 1984 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper attempts to provide a perspective on the causes of inflation by exploring why sustained inflations occur and the role of monetary policy in the inflation process. The conclusion reached in this paper is that in the last ten years there has been a convergence of views in the economics profession on the causes of inflation. As long as inflation is appropriately defined to be a sustained inflation, macro-economic analysis, whether of the monetarist or Keynesian persuasion, leads to agreement with Milton Friedman's famous dictum, "Inflation is always and everywhere a monetary phenomenon." However, the conclusion that inflation is a monetary phenomenon does not settle the issue of what causes inflation because we also need to understand why inflationary monetary policy occurs. This paper also examines this issue and it finds that the underlying cause of inflationin the United States has been accommodating monetary policy geared to achieving a high employment target. The role of expectations has been important in the inflationary process so that to prevent the resurgence of inflation at a minimum cost in terms of unemployment and output loss, monetary policy must be both non-accommodating and credible
Book Synopsis International Policy Coordination in Dynamic Macroeconomic Models by : Gilles Oudiz
Download or read book International Policy Coordination in Dynamic Macroeconomic Models written by Gilles Oudiz and published by . This book was released on 1984 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent analyses of the gains to policy coordination have focussed on the strategic aspects of macroeconomic policy making in a static setting. A major theme is that noncooperative policy making is likely to be Pareto inefficient because of the presence of beggar-thy-neighbor policies. This paper extends the analysis to a dynamic setting, thereby introducing three important points of realism to the static game. First, the payoffs to beggar-thy-neighbor policies look very different in one-period and multiperiod games, and thus so do the gains to coordination. Second, we show that policy coordination may reduce economic welfare if governments are nyopic in their policy making, as is sometimes claimed. Third, governments act under a fundamental constraint that they cannot bind the actions of later governments, and we investigate how this constraint alters the gains to policy coordination.
Book Synopsis On the Theory of Optimal Taxation in a Growing Economy by : Martin S. Feldstein
Download or read book On the Theory of Optimal Taxation in a Growing Economy written by Martin S. Feldstein and published by . This book was released on 1984 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers the following question: Would a "golden rule" capital accumulation policy of equating the marginal product of capital to the rate of growth of population be appropriate in a mixed economy in which the government does not have direct control over resource allocation but can use distortionary taxes to obtain resources for augmenting the private capital stock? The key result derived hereis that the golden rule level of capital intensity remains optimal if the tax structure that prevails at the equilibrium does not alter the individual labor supply. This is true even if the constancy of labor supply represents a balancing of income effects and substitution effects of a distortionary tax. In contrast, if the form of the tax and the nature of the utility function imply that labor supply is distorted, the optimal capital intensity will in general not correspond to the golden rule level.
Book Synopsis The Adjustment Process and the Timing of Trade Liberalization by : Michael Mussa
Download or read book The Adjustment Process and the Timing of Trade Liberalization written by Michael Mussa and published by . This book was released on 1984 with total page 118 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the appropriate time path of the tariff rate for a small open economy that has decided to move from protection of import competing industries to free trade. Adjustment costs for moving resources to alternative uses do not provide a rationale for gradual adjustment of the tariff rate because in the absence of distortions, rational optimizing agents will make socially appropriate investment decisions with respect to adjustment when they are qiven correct price signals. Some distortions of the adjustment process imply the desirability of gradual adjustment of the tariff rate to slow adjustment, but other distortions imply the desirability of subsidizing imports in the short run in order to speed movement of resources out of previously protected industries. Concern with the income redistribution effects of reductions in the tariff rate(which usually injure owners of factors in previously protected industries) does provide a general rationale for a gradual move to free trade. The influence of the unemployment consequences of tariff reduction on the appropriate path of commercial policy depends on the nature and shape of the respone of the rate of resource reallocation to the level of unemployment in previously protected industries.
Book Synopsis Financial Intermediation in the United States by : Benjamin M. Friedman
Download or read book Financial Intermediation in the United States written by Benjamin M. Friedman and published by . This book was released on 1984 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: The principal rationales that give rise to financial intermediation are benefits of size and specialization, the diversification of specific asset risks, and the pooling of even broader classes of risk. Each is a significant factor in accounting for the U.S. economy's reliance on intermediation. In addition, since World War II a further important factor has been the economy's continual shift away from government debt toward the debt of private nonfinancial entities including individuals and businesses. Non financial investors (primarily individuals) have exhibited a strong preference for holding the debt of these nonfinancial borrowers via financial intermediaries rather than directly. As the U.S. economy's reliance on financial intermediaries overall has increased during the post-war period, some specific kinds of intermediary institutions have grown more rapidly than others. Commercial banks have about held their own in relative terms, while steadily shifting their basic business back toward lending activities and away from securities investments. Nonbank deposit intermediaries have grown in relation to overall economic and financial activity, as the growth of savings and loan associations has more than offset the (relative) decline of mutual savings banks. Among private nondeposit intermediaries, life insurance companies have declined in relative terms while both public and private sector pension funds have shown exceptionally rapid growth. Finally, the federal government's participation in the financial intermediation process in the United States has also increased rapidly during these years, in part as a result of the pressures created by the economy's shift to private instead of government debt.
