scholarly journals OPTIMAL MONETARY AND FISCAL POLICIES IN A SEARCH-THEORETIC MODEL OF MONEY AND UNEMPLOYMENT

2012 ◽  
Vol 17 (6) ◽  
pp. 1330-1354 ◽  
Author(s):  
Pedro Gomis-Porqueras ◽  
Benoît Julien ◽  
Chengsi Wang
Keyword(s):  
American Economic Review ◽  
Theoretic Model ◽  
Fiscal Policies ◽  
Search Frictions ◽  
Fiat Money ◽  
Lump Sum ◽  
Monetary Transfers ◽  
Optimal Policies ◽  
Dividend Tax

In this paper we study optimal policies in an environment where search frictions both in labor and goods markets give rise to unemployment and fiat money, as in Berentsen, Menzio, and Wright (American Economic Review, 2011). The underlying frictions that give rise to endogenous unemployment and fiat money also result in inefficient outcomes. Here we show that efficiency can be restored whenever lump sum monetary transfers are possible and a decentralized production subsidy financed by money printing and a vacancy subsidy financed by a dividend tax exist. This is the case even when the Hosios and Friedman rules do not hold.

IMPLEMENTING THE BEST STEADY STATE WITH SAVINGS IN UNBACKED RISKY ASSETS

2012 ◽  
Vol 17 (4) ◽  
pp. 779-801 ◽  
Author(s):  
Julio Dávila
Keyword(s):  
Steady State ◽  
Overlapping Generations ◽  
Competitive Equilibrium ◽  
American Economic Review ◽  
Fiscal Policies ◽  
Risky Assets ◽  
Fiat Money ◽  
Lump Sum ◽  
Monetary Savings ◽  
Capital Subsidies

This paper shows, in an overlapping-generations economy à la Diamond [American Economic Review 55, 1126–1150 (1965)], that when savings in an unbacked asset (e.g., fiat money) bear some risk of becoming suddenly worthless, the market does not implement the best steady state attainable with that asset. Nonetheless, in the absence of absolutely riskless fiat money and excluding resorting to redistributive fiscal policies that would make it possible to attain the first-best steady state, this best monetary steady state can be implemented as a competitive equilibrium with the adequate policy of taxes on returns to capital, subsidies to returns to monetary savings, and lump-sum transfers. The policy is, at the steady state, balanced every period and nonredistributive.

scholarly journals Optimal stochastic scheduling of forest networks with switching penalties

1994 ◽  
Vol 26 (02) ◽  
pp. 474-497 ◽  
Author(s):  
Mark P. Van Oyen ◽  
Demosthenis Teneketzis
Keyword(s):  
Structural Properties ◽  
Optimal Policy ◽  
Switching Costs ◽  
Stochastic Scheduling ◽  
Single Server ◽  
Reward Rate ◽  
Holding Costs ◽  
Lump Sum ◽  
Optimal Policies ◽  
Set Up

We present structural properties of optimal policies for the problem of scheduling a single server in a forest network of N queues (without arrivals) subject to switching penalties. In addition to linear holding costs, we impose either lump sum switching costs or batch set-up delays which are incurred at each instant the server processes a job in a queue different from the previous one. We use reward rate notions to unearth conditions on the holding costs and service distributions for which an exhaustive policy is optimal. For the case of two nodes connected probabilistically in tandem, we explicitly define an optimal policy under similar conditions.

MONEY TAXES, MARKET SEGMENTATION, AND SUNSPOT EQUILIBRIA

2001 ◽  
Vol 5 (3) ◽  
pp. 327-352
Author(s):  
Todd Keister
Keyword(s):  
Market Segmentation ◽  
Competitive Equilibrium ◽  
Price Level ◽  
Asset Market ◽  
Fiat Money ◽  
Lump Sum ◽  
General Price Level ◽  
Redistribution Policy ◽  
Sunspot Equilibria ◽  
The Government

This paper investigates how volatile the general price level can be in an equilibrium where all uncertainty is extrinsic. The government operates a lump-sum redistribution policy using fiat money. An approach to modeling asset market segmentation is introduced in which this tax policy determines how volatile the price level can be, which in turn determines the volatility of consumption. The paper characterizes (i) the set of general price levels consistent with the existence of competitive equilibrium and (ii) the resulting set of equilibrium allocations. The results demonstrate how redistribution policies that are fixed in nominal terms can have a destabilizing effect on an economy, and show how to evaluate the amount of volatility that a particular policy may induce.

scholarly journals Money and Asset Liquidity in Frictional Capital Markets

2016 ◽  
Vol 106 (5) ◽  
pp. 496-502 ◽  
Author(s):  
Wei Cui ◽  
Sören Radde
Keyword(s):  
General Equilibrium ◽  
Capital Markets ◽  
Equilibrium Model ◽  
Asset Prices ◽  
Financing Constraints ◽  
Search Frictions ◽  
Liquidity Premium ◽  
Fiat Money ◽  
Dynamic General Equilibrium Model ◽  
Asset Liquidity

We endogenize asset liquidity and financing constraints in a dynamic general equilibrium model with search frictions on capital markets. Assets traded on frictional capital markets are only partially saleable. Liquid assets, such as fiat money, instead, are not subject to search frictions and can be used to insure idiosyncratic investment risks. Partially saleable assets thus carry a liquidity premium over fully liquid assets. We show that, in equilibrium, low asset saleability is typically associated with lower asset prices, tighter financing constraints, thus stronger demand for public liquidity. Lower asset liquidity feeds into real allocations, constraining real investment, consumption, and production.

scholarly journals The distortionary effect of monetary policy: credit expansion vs. lump-sum transfers in the lab

2018 ◽  
Vol 18 (2) ◽  
Author(s):  
Romain Baeriswyl ◽  
Camille Cornand
Keyword(s):  
Monetary Policy ◽  
General Equilibrium ◽  
Credit Expansion ◽  
Real Effect ◽  
Relative Prices ◽  
Lump Sum ◽  
Monetary Transfers ◽  
Effect Of Monetary Policy ◽  
Redistributive Effect

Abstract In an experimental monetary general equilibrium economy, we assess two processes of monetary injection: credit expansion vs. lump-sum monetary transfers. In theory, both processes are neutral and exert no real effect on allocation. In the experiment, however, credit expansion leads to substantial distortions of real allocation and relative prices, and exerts a redistributive effect across subjects. By contrast, an increase in money through lump-sum transfers does not distort real allocation.

scholarly journals How diabolic is the sovereign-bank loop? The effects of post-default fiscal policies

2021 ◽  
pp. 1-34
Author(s):  
André Diniz ◽  
Bernardo Guimaraes
Keyword(s):  
Fiscal Policy ◽  
Government Spending ◽  
Sovereign Debt ◽  
Policy Issue ◽  
Fiscal Policies ◽  
Debt Restructuring ◽  
Balance Sheets ◽  
Lump Sum ◽  
Greek Economy ◽  
Key Policy

Abstract The deleterious effect of debt restructuring on banks’ balance sheets and, consequently, on the economy as a whole has been a key policy issue. This paper studies how post-default fiscal policy interacts with this sovereign-bank loop and shape the response of a model economy. Calibration of the model matches characteristics of the Greek economy at the time of the bond exchange. Debt restructuring in place of higher lump-sum taxation or lower nonproductive government spending harms the economy even if no other cost of default is considered. However, the sovereign-debt loop is less costly to the economy than increases in labor or capital taxes to service debt. Even so, if fiscal policy is too responsive, a crowding-out effect inhibits the recovery of capital markets, hence a more conservative fiscal stance is desirable. Thus, how diabolic the post-default sovereign-bank loop is depends to a large extent on the way fiscal policy responds.

scholarly journals Optimal stochastic scheduling of forest networks with switching penalties

1994 ◽  
Vol 26 (2) ◽  
pp. 474-497 ◽  
Author(s):  
Mark P. Van Oyen ◽  
Demosthenis Teneketzis
Keyword(s):  
Structural Properties ◽  
Optimal Policy ◽  
Switching Costs ◽  
Stochastic Scheduling ◽  
Single Server ◽  
Reward Rate ◽  
Holding Costs ◽  
Lump Sum ◽  
Optimal Policies ◽  
Set Up

We present structural properties of optimal policies for the problem of scheduling a single server in a forest network of N queues (without arrivals) subject to switching penalties. In addition to linear holding costs, we impose either lump sum switching costs or batch set-up delays which are incurred at each instant the server processes a job in a queue different from the previous one. We use reward rate notions to unearth conditions on the holding costs and service distributions for which an exhaustive policy is optimal. For the case of two nodes connected probabilistically in tandem, we explicitly define an optimal policy under similar conditions.

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