monetary policy and liquid government debt abstract we examine the conduct of monetary policy in a world where the supply of outside money is controlled by the fiscal authority a scenario increasingly relevant for many developed economies today central bank control over the long run inflation rate depends on whether fiscal policy is ricardian or non ricardian the optimal monetary policy follows a generalized friedman rule that eliminates the liquidity premium on scarce treasury debt we derive conditions for determinacy under both fiscal regimes and show that they do not necessarily correspond to the taylor principle in addition non ricardian regimes may suffer from multiplicity of steady states when the government runs persistent deficits

household electricity demand revisited respond to price changes this paper develops a model for evaluating the effects of alternative tariff designs on electricity use the model concurrently addresses several interrelated difficulties posed by nonlinear pricing heterogeneity in consumer price sensitivity and consumption aggregation over appliances and time we estimate the model using extensive data for a representative sample of 1300 california households the results imply a strikingly skewed distribution of household electricity price elasticities in the population with a small fraction of households accounting for most aggregate demand response we then estimate the aggregate and distributional consequences of recent tariff structure changes recent efforts to restructure electricity markets have renewed interest in electricity demand and pricing this interest reflects a broad desire to improve the efficiency of electricity markets and policy makers concerns over the impact of price changes on consumers how new pricing mechanisms would affect households consumption and expenditures is a matter of considerable uncertainty however this uncertainty has provoked controversy and debate in the regulatory policy arena hampering market reforms using econometric methods to assess the effects of electricity price changes presents several challenges these include the nonlinear structure of tariff schedules aggregation of metered consumption behaviour over time and appliances and the interdependence of energy use with longer term household decisions over appliance ownership and dwelling characteristics the first two issues introduce complex simultaneity problems between marginal prices and consumption the third issue imposes high data requirements information on household specific appliance holdings and residence features and creates heterogeneity in consumption responses related to the characteristics of these durable goods when the researcher s objective is to develop a model for simulating the effects of prospective tariff changes ignoring these issues will provide an incomplete assessment of demand responses and potentially misleading predictions of a new tariff s consumption and revenue consequences in this paper we estimate a model of household electricity demand that can be used

distortionary taxes and the provision of public goods economists have long been concerned with finding an efficient level of public expenditure the classic statement of the problem was given by paul samuelson 1954 an optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good mrs mrt however samuelson s formula assumes that all of the revenue needed to finance public goods can be raised with lump sum taxes since this is not generally possible the formula must be modified to account for the distortionary effects of the tax system an appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds mcf in the case of samuelson s formula where government is entirely financed with lump sum taxes the mcf would be exactly 1 0 in the traditional view of economists distortionary taxes cause the mcf to be greater than one thus raising the cost of providing public goods in this paper we discuss some cases where the mcf may be less than one we will illustrate this possibility using numerical examples for labor taxes

the efficiency and equity consequences of two part tariffs in electricity pricing ahstrat t this paper evaluates electricity two part tariffs with both efficiency and equity criteria the efficiency of tariffs is analyzed by studying the relation between price and marginal cost for both customer connection and variable output the equity of tariffs is addressed by an analysis of cross subsidization to address these issues this paper presents a multiproduct cost function that can provide information on output and connection marginal costs for each customer class using a 1980 cross section of electric utilities it is shown that prices are not set in a first best efficient manner and least favor the commercial class

market structure and the pricing of electricity and natural gas us electricity and natural gas markets have traditionally been serviced by one of two market structures in some markets electricity and natural gas are sold by a regulated dual product monopolist while in other markets electricity and natural gas are sold by separate regulated single product monopolies i analyze whether electricity and natural gas prices depend on the market structure and compare these results to the predictions of a number of theories the results are most consistent with the political economy theories suggesting that regulators respond to interest group activity

the marginal welfare cost of public funds theory and estimates abstract we derive a general analytic formula for the marginal welfare cost mwc of public funds without imposing restrictive assumptions on preferences or technologies the framework encompasses the various special cases previously considered and reconciles the disparities among the reported estimates of mwc unresolved differences in existing estimates are fully explained by appropriate interpretations of intended thought experiments and alternative assumptions about the elasticity of labor supply with respect to public spending further progress in measuring mwc requires empirical estimation of labor supply functions that include government spending as an explanatory variable

debt deleveraging and the liquidity trap a fisher minsky koo approach in this paper we present a simple new keynesian style model of debt driven slumps that is situations in which an overhang of debt on the part of some agents who are forced into rapid deleveraging is depressing aggregate demand making some agents debt constrained is a surprisingly powerful assumption fisherian debt deflation the possibility of a liquidity trap the paradox of thrift a keynesiantype multiplier and a rationale for expansionary fiscal policy all emerge naturally from the model we argue that this approach sheds considerable light both on current economic difficulties and on historical episodes including japan s lost decade now in its 18th year and the great depression itself

liquidity and exchange rates abstract we present a two country extension of lucas s 1988a work on cash in advance constraints in asset markets in the model there is temporary separation between the goods and asset markets and money is used for transactions in both we first find that the exchange rate level depends on the share of money used for asset transactions a greater share appreciates the currency second stochastic open market operations increasing the domestic bonds supply appreciate the domestic currency third the liquidity effects of bond supply shocks cause an excess volatility of nominal exchange rates even when their fundamental value is constant

money interest rates and exchange rates with endogenously segmented markets we analyze the effects of money injections on interest rates and exchange rates when agents must pay a baumol tobin style fixed cost to exchange bonds and money asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money infrequently when the government injects money through an open market operation only those agents that are currently trading absorb these injections through their impact on these agents consumption these money injections affect real interest rates and real exchange rates the model generates the observed negative relation between expected inflation and real interest rates as well as persistent liquidity effects in interest rates and volatile and persistent exchange rates

rate of return regulation and two part tariffs in choosing a two part tariff a monopoly subject to rate of return regulation will rely more on demand elasticities and less on marginal costs than would a welfare maximizing firm the rate of return regulated firm also will reduce its access fee or its marginal usage fee more depending on whether adding consumers or increasing output requires marginally the most capital in the typical case these effects will favor declining block rate structures which helps to explain their widespread use by rate of return regulated firms

rental housing markets the incidence and duration of vacancy and the natural vacancy rate abstract new intermetropolitan and time series data from the bls are used to derive and model the incidence and duration of rental vacancies and to assess their importance to the price adjustment mechanism for rental housing research findings indicate that duration varies with measures of msa housing costs and housing stock heterogeneity while incidence varies with measures of population mobility public housing availability and population growth results support a more general specification of rental price adjustment in which the rate of real rent change reflects deviations in observed vacancy incidence and duration from their equilibrium levels the research provides new estimates of equilibrium vacancy rates for a large set of metropolitan areas over the 1987 1996 period

endogenous market participation and the general equilibrium value of money we study the monetary theory implications of fixed costs associated with trade in private assets we show that with heterogeneous endowment profiles it is possible for an endogenous subset of agents to hold currency even when it is dominated in return by a competing asset with respect to positive issues in monetary theory the model implies that changes in the steady state growth rate of the money supply have a negative effect on real interest rates because of endogenous market participation measures on the normative side we show that there may be an equity efficiency trade off from monetary deflation

a divisible search model of fiat money this paper extends the kiyotaki wright search model of fiat money to allow for divisible money and goods the extension allows me to examine the standard issues in monetary economics such as the neutrality and superneutrality of money by severing the artificial link in the kiyotaki wright model between the money supply and the number of money holders it is shown that money is neutral but not superneutral money growth generates a trading opportunity effect it changes the fraction of different agents in the economy and hence changes the probability with which agents have a successful match in addition money growth has a negative effect on the real money balance that is familiar in walrasian monetary models the balance of the two effects can imply a positive optimal money growth rate

career concerns inaction and market inefficiency evidence from utility regulation we study how incentive conflicts known as career concerns can generate inefficiencies not only within firms but also in market outcomes career concerns may lead agents to avoid actions that while valueincreasing in expectation could potentially be associated with a bad outcome we apply this theory to natural gas procurement by regulated public utilities and show that career concerns may lead to a reduction in surplus increasing market transactions during periods when the benefits of trade are likely to be greatest we show that data from natural gas markets are consistent with this prediction and difficult to explain using alternative theories

a monetary explanation of the equity premium term premium and risk free rate puzzles this paper develops and estimates a monetary model that offers an explanation of some puzzling features of observed returns on equities and default free bonds the key feature of the model is that some assets other than money play a special role in facilitating transactions which affects the rate of return that they offer the model is capable of producing a low risk free rate a high equity premium and an average positive relationship between maturity and term premium for default free bonds the model s implications for the joint distribution of asset returns velocity inflation money growth and consumption growth are also compared to the behavior of these variables in the u s economy

money and exchange rates in the grossman weiss rotemberg model abstract we analyze the impact of monetary policy on inflation interest rates and exchange rates in a model with segmented asset markets developed by grossman and weiss 1983 and rotemberg 1984 1985 we find parameters for which real and nominal exchange rates in this model are 1 much more volatile than interest rates inflation rates and money growth rates 2 highly correlated with each other and 3 highly persistent while this model fails to match the data in other important respects it illustrates a potentially useful approach to modelling exchange rate behavior

rising inequality changes in the distribution of income and consumption in the 1980s this paper examines changes in the distribution of income and consumption in the united states during the 1980s using data from the current population survey income and consumer expenditure survey consumption we reach three primary conclusions first changes in the distribution of consumption parallel changes in the distribution of income the lowest quintile of the consumption distribution received 0 9 percentage points less of total consumption in 1988 than in 1980 the corresponding decline for income was 0 6 percentage points second broad conclusions concerning recent changes in the consumption distribution are not very sensitive to the exact choice of a measure of family needs under a wide variety of alternative household equivalence scales there is a widening in the consumption distribution in the 1980s third the usc of consumption measures of well being in place of measures based on current money income docs change conclusions concerning the extent of poverty in the united stales using the official federal poverty thresholds we find that the overall consumption poverty rate was three percentage points below the income poverty rate in 1988 comparisons of the poverty rates of the elderly and the non elderly are substantially affected by the choice of poverty measure the consumption poverty rare for the elderly was only 60 percent of the rate for adults and one third of the rate for children in 1988 this abstract was borrowed from another version of this item

liquidity loanable funds and real activity abstract this paper develops a general equilibrium model of two traditional explanations of the monetary black box linking money and real activity the liquidity effect and the loanable funds effect these effects are modeled with a monetary production economy in which central bank injections of cash are funnelled into the economy through the credit market since only borrowers have direct access to the newly injected cash monetary injections cause nominal interest rates to fall if firms are borrowers then monetary injections also increase current and future real activity

an econometric model of housing price permanent income tenure choice and housing demand abstract this paper addresses the determination of housing price permanent income tenure choice and housing demand full housing demand elasticities incorporate the interactive effects among the four stages of the model price and income have major effects in the tenure choice equation sociodemographic variables such as age have complex effects that may be lost in simpler forms of estimation

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

consumption and real exchange rates in dynamic economies with non traded goods abstract we examine the possibility that non traded goods may account for several striking features of international macroeconomic data large persistent deviations from purchasing power parity small correlations of aggregate consumption fluctuations across countries and substantial international real interest rate differentials a dynamic exchange economy is used to show that non traded goods in principle can account for each of these phenomena in the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates but we find little evidence for this relation in time series data for eight oecd countries

market participation and sunspot equilibria we investigate the structure of competitive equilibria in an exchange economy parametrized by i endowments and ii restrictions on market participation for arbitrary regular endowments if few consumers are restricted there are no sunspot equilibria if endowments are allowed to vary while restrictions on market participation are fixed there is a generic set of preferences such that sunspot equilibria exist for a non empty subset of endowments our analysis extends to the general case of an arbitrary number of restricted consumers the results of cass and shell for the polar cases in which either i no consumers are restricted or ii all consumers are restricted

can the fiscal authority constrain the central bank abstract the fiscal theory of the price level ftpl suggests in its extreme form that the fiscal authority always constrains central bank behavior a fisherian model is used to show that fiscal policy can be irrelevant for the central bank and that a central bank can act independently even when constrained to monetize the government debt in a model with secured credit and scarce collateral which can explain low real interest rates the valuation of consolidated government debt needs to account for inefficiency and liquidity premia the fiscal authority may wish to tolerate inefficiency so as to finance public goods provision this article is part of a special issue entitled fiscal and monetary policies

the distributional impacts of u s energy policy abstract this paper surveys energy policy in the united states from a distributional perspective focusing on the distributional impacts of energy taxes is too narrow a framework the united states relies much more heavily on regulation than taxation to address energy related market failures it argues that most regulatory policies and tax subsidies to achieve energy policy goals are regressive this includes fuel economy standards ev purchase incentives and energy efficiency tax incentives in contrast a carbon tax is likely to be progressive even when ignoring the use of revenue the view that carbon taxes are regressive stems from an incomplete distributional analysis that assumes all impacts arise from increases in the costs of consumer goods and services recent analyses have emphasized the importance of impacts on sources of income in particular a carbon tax is likely to reduce returns to capital more than wages with capital disproportionately held by higher income households this differential factor income effect is progressive in addition transfer income more important for lower income households tends to be indexed and so contributes to a carbon tax s progressivity how carbon tax revenue is used can add even greater progressivity to a carbon tax reform

demographics and real interest rates inspecting the mechanism abstract the demographic transition can affect the equilibrium real interest rate through three channels an increase in longevity or expectations thereof puts downward pressure on the real interest rate as agents build up their savings in anticipation of a longer retirement period a reduction in the population growth rate has two counteracting effects on the one hand capital per worker rises thus inducing lower real interest rates through a reduction in the marginal product of capital on the other hand the decline in population growth eventually leads to a higher dependency ratio the fraction of retirees to workers because retirees save less than workers this compositional effect lowers the aggregate savings rate and pushes real rates up we calibrate a tractable life cycle model to capture salient features of the demographic transition in developed economies and find that its overall effect is a reduction of the equilibrium interest rate by at least one and a half percentage points between 1990 and 2014 demographic trends have important implications for the conduct of monetary policy especially in light of the zero lower bound on nominal interest rates other policies can offset the negative effects of the demographic transition on real rates with different degrees of success

liquidity monetary policy and the financial crisis a new monetarist approach a model of public and private liquidity integrates financial intermediation theory with a new monetarist monetary framework nonpassive fiscal policy and costs of operating a currency system imply that an optimal policy deviates from the friedman rule a liquidity trap can exist in equilibrium away from the friedman rule and there exists a permanent nonneutrality of money driven by an illiquidity effect financial frictions can produce a financial crisis phenomenon that can be mitigated by conventional open market operations working in an unconventional manner private asset purchases by the central bank are either irrelevant or they reallocate credit and redistribute income jel e13 e44 e52 e62 g01 liquidity is a class of assets that is useful in exchange some of these liquid assets are government liabilities federal reserve notes treasury bills and treasury notes some are private liabilities the deposit liabilities of banks and some asset backed securities for example conventional wisdom holds that the main role of a central bank is to manage public liquidity in a manner that controls inflation and enhances the provision of private liquidity and credit however the mechanism by which central bank actions work to perform this role still appears to be poorly understood as has been highlighted by the financial crisis and the ensuing policy responses the purpose of this paper is to build a model of public and private liquidity that captures the features of modern economies essential to the analysis of monetary policy and that can be used to shed light on some current monetary policy problems and questions what is a liquid asset and what roles do privately provided and publicly provided liquid assets play in exchange in a model where we capture these roles for liquid assets what are the implications for monetary policy under what circumstances can a liquidity trap occur how does monetary policy work when there is a positive quantity of excess reserves held by banks what does a financial crisis do to the supply of private liquidity and what should monetary policy do in response

the perils of taylor rules abstract since john taylor s 1993 carnegie rochester conf ser publ policy39 195 214 seminal paper a large literature has argued that active interest rate feedback rules that is rules that respond to increases in inflation with a more than one for one increase in the nominal interest rate are stabilizing in this paper we argue that once the zero bound on nominal interest rates is taken into account active interest rate feedback rules can easily lead to unexpected consequences specifically we show that even if the steady state at which monetary policy is active is locally the unique equilibrium typically there exist an infinite number of equilibrium trajectories originating arbitrarily close to that steady state that converge to a liquidity trap that is a steady state in which the nominal interest rate is near zero and inflation is possibly negative journal of economic literature classification numbers e52 e31 e63

crowd out effects of place based subsidized rental housing new evidence from the lihtc program abstract since its inception in 1987 the low income housing tax credit lihtc program has ballooned into the largest ever source of subsidized construction of low income housing in the united states accounting for one third of all recent multi family rental construction this paper examines the crowd out effects of this increasingly important source of low moderate income housing to do so we analyze the impact of lihtc construction at three different levels of geography msa county and 10 mile radius circles this allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors political variables are also used as instruments to further facilitate identification in all of our models iv estimates yield substantially greater crowd out than ols confirming the endogenous attraction of lihtc development to areas ripe for new construction our most robust iv estimates indicate that nearly 100 of lihtc development is offset by a reduction in the number of newly built unsubsidized rental units although the confidence band around this point estimate allows for less dramatic assessments additional estimates suggest that lihtc development has a much more moderate impact on construction of owner occupied housing but these estimates are imprecise overall while lihtc development may well affect the location of low moderate income rental housing opportunities our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small

rent burden and the great recession in the usa in the aftermath of the recent recession the percentage of households facing rent burden in the usa reached historically high levels while cost burden for owners has shrunk this study uses two panels from the survey of income and program participation sipp to compare the prevalence distribution and household responses to the phenomenon of rent burden in the usa in the years immediately before and after the great recession results suggest that rent burden has become more prevalent after the recession and that income household composition and location are major drivers of this phenomenon both before and after the recession results also indicate that exiting rent burden was more difficult in the years after the recession and that an increasingly common coping mechanism for rent burdened households is to increase their household sizes these results indicate that renters have experienced increased financial stress related to their housing this finding is notable given the lack of policy responses t

efficient retail pricing in electricity and natural gas markets a long line of research investigates whether the retail prices of electricity and natural gas send proper signals about scarcity in order to induce efficient consumption historically regulated utilities have not designed tariffs that set marginal prices equal to marginal costs currently some jurisdictions are opening the retail sectors to competition via retail choice these new regimes replace imperfect regulation with imperfect competition as the process by which retail tariffs are formed we discuss the challenges in evaluating the efficiency of tariffs and present evidence of how pricing has changed in markets with retail choice

money and interest in a cash in advance economy the authors analyze an aggregative general equilibrium model in which the use of money is motivated by a cash in advance constraint applied to purchases of a subset of consumption goods the system is subject to both real and monetary shocks which are economy wide and observed by all they develop methods for verifying the existence of characterizing and explicitly calculating equilibria copyright 1987 by the econometric society

the equity and efficiency of two part tariffs in u s natural gas markets abstractresidential natural gas customers in the united states face volumetric charges that average about 30 percent more than the marginal cost of gas this inefficient departure from marginal cost pricing allows gas utilities to cover their fixed infrastructure and operating costs proposals for recovering these costs instead through fixed monthly fees are often opposed because of a widespread belief that current rate schedules have desirable distributional consequences using nationally representative household level data we show that the correlation between household income and natural gas consumption is indeed positive but surprisingly weak so current rate schedules are only mildly progressive in part we argue that this is because poor households tend to have larger families and less energy efficient homes we calculate bill impacts under a variety of scenarios and show that even a modest energy assistance program would more than offset the distributional impact of tariff rebalancing for most low

rent vouchers and the price of low income housing since the early 1980s low income housing subsidies have increasingly shifted towards vouchers which allow recipients to rent in the private market by 1993 vouchers subsidized as many households as lived in traditional housing projects although most low income households did not receive any subsidies this study investigates whether this policy has raised rents for unsubsidized poor households as many analysts predicted when the program was conceived the main finding is that low income households in metropolitan areas with more vouchers have experienced faster rent increases than those where vouchers are less abundant in the 90 biggest metropolitan areas vouchers have raised rents by 16 percent on average a large effect consistent with a low supply elasticity in the low quality rental housing market considered as a transfer program this result implies that vouchers have caused a 8 2 billion increase in the total rent paid by low income non recipients while only providing a subsidy of 5 8 billion to recipients resulting in a net loss of 2 4 billion to low income households

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

lifetime incidence and the distributional burden of excise taxes this implies that low income households in one year have some chance of being higher income households in other years and significantly affects the estimated distributional burden of excise taxes this paper shows that household expenditures on gasoline alcohol and tobacco as a share of total consumption a proxy for lifetime income are much more equally distributed than expenditures as a share of annual income from a longer horizon perspective excise taxes on these goods are therefore much less regressive than standard analyses suggest this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

what happens to household formation in a recession abstract while many studies have investigated the determinants of housing demand very few studies have focused on how economic conditions affect the formation of potential households directly potential households may choose to delay entry into the housing market by remaining with one s parents during times of economic hardship or by combining with other persons to share housing costs using a variety of modeling approaches we find that both the increase in the unemployment rate and the presence of recessions reduce the rate of household formation simulations suggest that these declines are substantively important for example in a recession the likelihood that a young adult will form an independent household falls by 1 9 points depending on the age of the person by way of comparison if an individual is unemployed the likelihood of leaving the parental home is up to 11 points lower

scarcity of safe assets inflation and the policy trap abstract a goal of this paper is to make sense of the seemingly puzzling behavior of interest rates and inflation and the role of central banks in that behavior during and after the great recession particularly in the united states to this end we construct a model in which government debt plays a key role in exchange and can bear a liquidity premium if asset market constraints bind then there need not be deflation under an indefinite zero interest rate policy zirp further zirp may not be optimal under these circumstances a taylor rule central banker could be subject to a zirp trap and persistently undershoot target inflation as well a liquidity premium on government debt creates additional taylor rule perils because of a persistently low real interest rate we make a case that this is the key policy predicament currently faced by many central banks in the world

current federal reserve policy under the lens of economic history a review essay this review essay reviews the volume edited by owen humpage current federal reserve policy under the lens of economic history essays to commemorate the federal reserve system s centennial and provides a broader perspective on central banking issues the papers in the humpage volume address various aspects of central banking history money and private banking with a focus on putting recent fed policies in perspective the topics covered include the role of the central bank as lender of last resort the effects of open market operations versus central bank lending central bank independence the political economy of monetary unions financial crises the effects of unconventional monetary policies commodity monies and the canadian financial system as a natural experiment

self fulfilling deflations abstract what types of monetary and fiscal policy rules produce self fulfilling deflationary paths that are monotonic and empirically relevant this paper presents simple theoretical conditions that guarantee the existence of these paths in a general equilibrium model with sticky prices these sufficient conditions are weak enough to be satisfied by most monetary and fiscal policy rules a quantification of the model which combines a real shock a la hayashi and prescott 2002 with a simultaneous sunspot that deanchors inflation expectations matches the main empirical features of the japanese deflationary process during the lost decade the results also highlight the key role of the assumption about the anchoring of inflation expectations for the size of fiscal multipliers and in general for any policy analysis

inflation and welfare in the steady state this is a paper on expected inflation and welfare in steady state equilibrium the demand for money is an inventory demand with an endogenous payment period the clower constraint is not imposed higher inflation reduces welfare by reducing consumption as people devote more of their real income to maintaining lower average money holdings high inflation does not necessarily promote an increase in the capital stock the mundell tobin effect is absent the policy conclusion is standard deflate at the rate of time preference because capital is held socially optimal consumption falls short of its golden rule level if inside money is allowed it drives out fiat money and welfare is again at a maximum

a tractable model of indirect asset liquidity abstract assets have indirect liquidity if they cannot be used as media of exchange but can be traded to obtain a medium of exchange money and thereby inherit monetary properties this essay describes a simple dynamic model of indirect asset liquidity provides closed form solutions for real and nominal assets and discusses properties of the solutions some of these are standard assets and money are imperfect substitutes asset demand curves slope down and money is not always neutral other properties are more surprising prices are flexible but appear sticky and an increase in the supply of indirectly liquid assets can decrease welfare because of its simplicity the model can be useful as a building block inside a larger model and for teaching concepts from monetary theory

responsiveness to energy price changes when salience is high residential natural gas demand in ukraine abstract despite its importance for policy purposes evidence about the price elasticity of natural gas demand in the residential sector is very limited and based on inference from situations with modest variation in prices we focus on a locale and time when price changes were extreme and salient to consumers namely ukraine between 2013 and 2017 we exploit the tariff reforms and detailed micro level household consumption records to assess whether consumers adjust their consumption in response to the rate changes and estimate the price elasticity of the demand for natural gas to isolate behavior attention is restricted to those households that made no structural energy efficiency upgrades to their homes thus keeping the stock of gas using capital fixed we find that households are capable of reducing consumption even without installing insulation or making any other structural modifications to their homes the price elasticity is about 0 16 wealthier households people living in multifamily buildings and heavy users have more inelastic demands households reduced consumption even when they received government assistance this and the fact the demand is inelastic especially for wealthier households bode well for tariffs or energy tax schemes where wealthier households subsidize the consumption of the poorer ones

a simple general equilibrium version of the baumol tobin model this paper presents a simple general equilibrium model that includes optimizing choices of the frequency of trips to the bank the model is used to analyze the effect of inflation on the capital stock the interest elasticity of money demand the optimum quantity of money and the welfare costs of inflationary finance

optimal departures from marginal cost pricing focuses on departures from marginal cost pricing optimal allocation or resources level of tax revenue that will be collected by the government theorems developed for resource allocation ebsco

extremely low income households housing affordability and the great recession the effects of the great recession on housing equity and homeownership have been well documented however we know little about how rental households fared and the efficacy of housing subsidies in addressing affordability gaps this paper examines the extent to which rental housing became less affordable for extremely low income eli households those earning less than 30 of the area median income ami i then run regression models to determine the local characteristics most strongly associated with larger affordability gaps with a focus on whether housing subsidies are effective at combating such gaps rental affordability gaps became more pronounced during the great recession in nearly 70 of the counties in my sample there was an increase from 2007 to 2010 in the number of eli households per affordable rental unit across the country the increase was 17 a dramatic increase in only three years there is considerable variation across the country with acute affordability crises often concentrated in the south particularly florida regression models provide compelling evidence that housing vouchers public housing and project based section 8 subsidies play an important role in limiting the extent to which large numbers of eli households are competing for a shortage of low cost rental units however these programmes do not respond quickly to local needs such as those brought about by the great recession a pilot study where local housing authorities had funding to be more agile and responsive would be an important step toward crafting better policy

open market operations abstract in an open market operation the central bank swaps currency for bonds we show how injecting money in this way is different from transfers the way policy is usually formulated the model captures liquidity explicitly by modeling the roles of assets in frictional exchange under various specifications for market structure and the acceptability or pledgeability of assets we discuss implications for the fisher and quantity equations the possibility of negative nominal yields liquidity traps and market segmentation when liquidity is endogenized using information theory multiple equilibria emerge with different policy predictions interest on reserves and quantitative easing are discussed