scholarly journals Bounds on price‐setting

2021 ◽  
Vol 16 (3) ◽  
pp. 979-1015
Author(s):  
Narayana R. Kocherlakota
Keyword(s):  
Fiscal Policy ◽  
Left Endpoint ◽  
Price Setting ◽  
Macroeconomic Models ◽  
Output Sequence ◽  
Long Run ◽  
Degree Of Confidence ◽  
Monetary And Fiscal Policy ◽  
Time Invariant ◽  
Uniformly Bounded

I study a class of macroeconomic models in which all firms can costlessly choose any price at each date from an interval (indexed to last period's price level) that includes a positive lower bound. I prove three results that are valid for any such half‐closed interval (regardless of how near zero the left endpoint is). First, given any output sequence that is uniformly bounded from above by the moneyless equilibrium output level, that bounded output sequence is an equilibrium outcome for a (possibly time‐dependent) specification of monetary and fiscal policy. Second, given any specification of monetary and fiscal policy in which the former is time‐invariant and the latter is Ricardian (in the sense of Woodford 1995), there is a sequence of equilibria in which consumption converges to zero on a date‐by‐date basis. These first two results suggest that standard macroeconomic models without pricing bounds may provide a false degree of confidence in macroeconomic stability and undue faith in the long‐run irrelevance of monetary policy. This paper's final result constructs a non‐Ricardian nominal framework (in which the long‐run growth rate of nominal government liabilities is sufficiently high) that pins down a unique stable real outcome as an equilibrium.

scholarly journals Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates

2014 ◽  
Vol 104 (10) ◽  
pp. 3154-3185 ◽  
Author(s):  
Eric T. Swanson ◽  
John C. Williams
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Lower Bound ◽  
Private Sector ◽  
Interest Rates ◽  
Zero Lower Bound ◽  
Short Term ◽  
Macroeconomic Models ◽  
Monetary And Fiscal Policy ◽  
Effectiveness Of Monetary Policy

According to standard macroeconomic models, the zero lower bound greatly reduces the effectiveness of monetary policy and increases the efficacy of fiscal policy. However, private-sector decisions depend on the entire path of expected future short-term interest rates, not just the current short-term rate. Put differently, longer-term yields matter. We show how to measure the zero bound's effects on yields of any maturity. Indeed, 1- and 2-year Treasury yields were surprisingly unconstrained throughout 2008 to 2010, suggesting that monetary and fiscal policy were about as effective as usual during this period. Only beginning in late 2011 did these yields become more constrained. (JEL E43, E52, E62)

scholarly journals The Effectiveness of Fiscal and Monetary Policy: Case of Uzbekistan

2020 ◽  
Vol 6 (3) ◽  
pp. 266-274
Author(s):  
Sh. Sitmuratov
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Interest Rate ◽  
Current Period ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Goods Market ◽  
Short Run ◽  
Monetary And Fiscal Policy ◽  
Fiscal And Monetary Policy

The article examines an effectiveness of government monetary and fiscal policy for Uzbekistan by constricting IS-curve for goods market and LM-curve for money market, simultaneously. For the both markets equilibrium interest rate is also determined. The results show that the variables are co integrated, that the variables have long-run or short-run equilibrium relationship between them. According to the empirical results, the long-run equilibrium interest rate for covered period was 22.0% for Uzbekistan, for the current period we recommend the equilibrium interest rate around 15%.

scholarly journals The Politics of Surprise Devaluations: Modelling Motives for Giving Up a Peg

2013 ◽  
Vol 233 (5-6) ◽  
Author(s):  
Frank Bohn
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Time Preference ◽  
Political Instability ◽  
Political Stability ◽  
Policy Framework ◽  
Short Term ◽  
Trade Off ◽  
Long Run ◽  
Monetary And Fiscal Policy

SummaryPlanned ‘‘surprise’’ devaluations are often spurred by non-economic circumstances: a rentseeking government; political instability; or the opportunity to put the blame on a predecessor government. In this paper, these aspects are incorporated in the monetary and fiscal policy framework first suggested by Alesina and Tabellini (1987). It is shown that reneging on a fixed exchange rate promise unambiguously produces short term benefits, but long run losses. This leads to a non-straightforward trade-off between greediness (propensity for expropriation) and political stability (which implies a low time preference). The findings are empirically relevant and theoretically robust to extensions.

La crisi americana: appunti di viaggio

2009 ◽  
pp. 103-119
Author(s):  
Massimo Florio
Keyword(s):  
New York ◽  
Fiscal Policy ◽  
Income Distribution ◽  
New York Times ◽  
Short Term ◽  
Current Crisis ◽  
Public Intervention ◽  
Long Run ◽  
Monetary And Fiscal Policy ◽  
Bail Out

- This paper comments on an editorial on the American crisis published in the New York Times by Professor Casey Mulligan, University of Chicago. According to Mulligan, the crisis is nothing more than a financial fluctuation: the banks should not be bailed out, other financial actors can take care of business investments, the delay in investment and consumption is not a big problem and public intervention is therefore useless. This paper argues, instead, that the current crisis is not primarily financial but originates from a prolonged shock that hit income distribution. The share of labour declined, while the share of capital increased. To sustain returns on capital it was necessary to force lending to consumers. In the short term both monetary and fiscal policy are needed, but in the mid-to-long run it is necessary to return to a more balanced income distribution.EconLit Classification: E250, E620, E650Keywords: Financial and Economic Crisis, Banks Bail-Out, Income Distribution

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