migration age and earnings the special case of employee transfers the regional relocation of workers within firms is examined this aspect of migration has received little attention in spite of the routine occurance of employee transfers the existence of such transfers suggests that a portion of each worker s human capital is employer specific and readily transferrable across locations thus a different age profile for transfers than that for conventional migrants may be expected specially a model of employee relocation and the consequences of relocation on post transfer earnings is examined

scarce collateral the term premium and quantitative easing abstract a model of money credit and banking is constructed in which the differential pledgeability of collateral and the scarcity of collateralizable wealth lead to a term premium an upward sloping nominal yield curve purchases of long maturity government debt by the central bank are always a good idea but for unconventional reasons a floor system is preferred to a channel system as a floor system permits welfare improving asset purchases by the central bank

a tale of employment decline in two cities how bad was the worst of times this paper describes the communitywide effects on employment earnings and labor mobility of the severe employment declines that occurred in major industries in the buffalo new york and providence rhode island smsas in the period 1960 70 the author analyzes the work histories drawn from longitudinal social security administration data files of about 20 000 men with job experience in those years and smsas a major finding is that voluntary separations exceeded employment reductions in nearly all industries indicating that contrary to popular belief relatively few workers in those cities were forced out of their jobs in addition the workers studied were very mobile about one third of job changers migrated out of their original smsa and many changers moved into different industries some workers who lost their jobs suffered severe earnings loss but the total earnings loss was not particularly large the author discusses the policy implications of those findings

money and growth an alternative approach this paper takes an alternative approach to the topic of money and growth by developing a model in which the effects of sustained capital accumulation on an evolving system of payments in addition to the conventional effects of sustained inflation on growth are examined while the effects of inflation on growth are small the effects of growth on the monetary system are substantial the results are consistent with ideas about money and growth contained in work that predates that of james tobin and miguel sidrauski as well as with evidence that money and asset demands vary systematically within economies as they develop copyright 1994 by american economic association

labor market conditions and the reemployment of displaced workers the authors of this study use data from the january 1984 current population survey to examine the impact of local labor market conditions on the financial losses of displaced manufacturing workers they find that strong overall growth in the local economy reduced the economic losses of white collar workers whose industry of displacement was declining but not of blue collar workers in the same situation most older poorly educated blue collar workers with long tenure at their pre layoff job suffered large financial losses even when displaced in a growing local economy all workers including those who were young and well educated suffered large financial losses when located in a depressed local economy

search bargaining money and prices the goal of this paper is to extend existing search theoretic models of fiat money which until now have assumed that the price level is exogenous by explicitly incorporating bilateral bargaining this allows us to determine the price level endogenously and leads to additional insights concerning the role of money for example we find that monetary equilibria are generally inefficient in the sense that output and prices differ from the solution to a social planner s problem although the difference can become small as the discount rate or search friction vanishes we also find that there exist nonstationary inflationary equilibria

the economic consequences of labor mobility unlike most previous research on the relative changes in earnings of job stayers and job changers this study examines the variance in earnings changes rather than simply average changes men and women rather than only men and the five year period following job change rather than only the first year or two the author finds great variability in earnings changes both within and across race and gender groups notably men gained more from quits and except in the case of low wage workers lost less from layoffs than women also men suffered a much smaller penalty than women for repeated job changes for all groups the percentage difference between earnings before and after leaving a job generally persisted for several years

money and credit redux do we need both money and credit in models with explicit roles for payment instruments we show the answer is no if credit is easy money is useless if credit is tight money can be essential but then credit is irrelevant and changes in debt limits are neutral real balances respond endogenously to leave total liquidity constant this is true for exogenous or endogenous policy and debt limits secured or unsecured credit and fairly general preferences and pricing mechanisms while we also show how to overturn some results the benchmark model suggests credit conditions matter less than some people think

money asset prices and the liquidity premium this paper examines the effect of monetary policy on the liquidity premium i e the market value of the liquidity services that financial assets provide to guide the empirical analysis i set up a monetary search model in which bonds provide liquidity services in addition to money the theory predicts that money supply and the nominal interest rate are positively correlated with the liquidity premium but the latter is negatively correlated with the bond supply the empirical analysis over the period from 1946 and 2008 confirms the theoretical findings this indicates that liquid bonds are substantive substitutes for money and the opportunity cost of holding money plays a key role in asset price determination the model can rationalize the existence of negative nominal yields when the nominal interest rate is low and liquid bond supply decreases

the societal benefit of a financial transaction tax we provide a novel justification for a financial transaction tax for economies where agents face stochastic consumption opportunities a financial transaction tax makes it more costly for agents to readjust their portfolios of liquid and illiquid assets in response to liquidity shocks which increase both the demand for and the price of liquid assets the higher price improves liquidity insurance and welfare for other market participants we calibrate the model to u s data and find that the optimal financial transaction tax is 1 6 and that it reduces the volume of financial trading by 17

money in search equilibrium in competitive equilibrium and in competitive search equilibrium we compare three market structures for monetary economies bargaining search equilibrium price taking competitive equilibrium and price posting competitive search equilibrium we also extend work on the microfoundations of money by allowing a general matching technology and entry we study how equilibrium and the effects of policy depend on market structure under bargaining trade and entry are both inefficient and inflation implies first order welfare losses under price taking the friedman rule solves the first inefficiency but not the second and inflation may actually improve welfare under posting the friedman rule yields the first best and inflation implies second order welfare losses

a model in which monetary policy is about money abstract optimal monetary policy is studied in a model with i heterogeneity in the degree to which different people are monitored have publicly known histories ii idiosyncratic shocks that give rise to heterogeneity in earning and spending realizations and iii central bank intervention in a market in claims or credit in which the participants are those who are heavily monitored a special case of the model has everyone perfectly monitored in that case there is no role for money and no role for central bank intervention in the example displayed with imperfect monitoring optimal intervention is not simple

the political economy of ec protectionism national protectionism based on article 115 treaty of rome this paper investigates the trade policy of the ec based on art 115 treaty of rome it is shown that politicians and bureaucrats take advantage of the significant discretion the procedure allows political and bureaucratic self interest are the underlying motives for national trade barriers against non member countries based on art 115 the empirical results support this hypothesis

money and credit with limited commitment and theft we study the interplay among imperfect memory limited commitment and theft in an environment that can support monetary exchange and credit imperfect memory makes money useful but it also permits theft to go undetected and therefore provides lucrative opportunities for thieves limited commitment constrains credit arrangements and the constraints tend to tighten with imperfect memory as this mitigates punishment for bad behavior in the credit market theft matters for optimal monetary policy but at the optimum theft will not be observed in the model the friedman rule is in general not optimal with theft and the optimal money growth rate tends to rise as the cost of theft falls

money and dynamic credit arrangements with private information abstract we construct a model with private information in which consumers write dynamic contracts with financial intermediaries a role for money arises due to random limited participation of consumers in the financial market without defection constraints a friedman rule is optimal the mean and variability of wealth tend to fall with inflation in the steady state and the welfare effects of inflation are very small with defection constraints the effects of inflation on the distribution of welfare and consumption are large but the effect on average welfare is still small the relaxation of defection constraints resulting from higher inflation can cause a substantial increase in the real interest rate journal of economic literature classification numbers d8 e4 g2

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

on efficient distribution with private information this paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with many consumers each of whom is subject to private idiosyncratic taste shocks we propose a recursive method for finding feasible allocations that are incentivecompatible and that are pareto optimal within this set the method is applied to several parametric examples we find that in an efficient allocation the degree of inequality continually increases with a diminishing fraction of the population receiving an increasing fraction of the resources we discuss the extent to which these allocations can be decentralized via market arrangements this paper is a study of the dynamics of the efficient distribution of consumption in an exchange economy with private information the economy we study has a constant endowment flow of a single non storable consumption good which is to be allocated each period among a large number of consumers each period these consumers experience unpredictable idiosyncratic privately observed taste shocks affecting their marginal utility of current consumption efficiency dictates that more resources be allocated to those consumers who in any given period have a high marginal utility of current consumption

money is memory abstract this paper examines the sets of feasible allocations in a large class of economic environments in which commitment is impossible following myerson 8 the standard definition of feasibility is adapted to take account of the lack of commitment the environments feature either memory or money memory is defined as knowledge on the part of an agent of the full histories of all agents with whom he has had direct or indirect contact in the past money is defined as an object that does not enter utility or production functions and is available in fixed supply the main proposition is that any allocation that is feasible in an environment with money is also feasible in the same environment with memory depending on the environment the converse may or may not be true hence from a technological point of view money is equivalent to a primitive form of memory journal of economic literature classification numbers e40 c73 d82

money banking and monetary policy abstract an important function of banks is to issue liabilities like demand deposits that are relatively safe and liquid we introduce a risk of theft and a safe keeping role for banks into modern monetary theory this provides a general equilibrium framework for analyzing banking in historical and contemporary contexts the model can generate the concurrent circulation of cash and bank liabilities as media of exchange or inside and outside money it also yields novel policy implications for example negative nominal interest rates are feasible and for some parameters optimal for other parameters strictly positive nominal rates are optimal

indeterminacy in credit economies abstract we characterize the equilibrium set of a two good pure credit economy with limited commitment under both pairwise and centralized meetings we show that the set of equilibria derived under not too tight solvency constraints alvarez and jermann 2000 commonly used in the literature is of measure zero in the whole set of perfect bayesian equilibria there exist a continuum of stationary equilibria a continuum of endogenous credit cycles of any periodicity and a continuum of sunspot equilibria irrespective of the assumed trading mechanism equilibria featuring too tight solvency constraints can generate growing credit limits over time periodic credit shutdowns and heterogeneous debt limits across ex ante identical borrowers moreover we provide examples of credit cycles that dominate from a social welfare point of view all equilibria with not too tight solvency constraints