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1994 Working Papers

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The Effects of Open Market Operations a Model of Intermediation and Growth
By Bruce D. Smith & Stacey L. Schreft
Working Paper 94-10
Released: August 1994

We examine a standard model of capital accumulation in which spatial separation and limited communication create a role for money and shocks to portfolio needs create a role for banks. In this context we examine the existence, multiplicity, and dynamical...

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The Coalition-Proof Core in Adverse Selection Economies
By John A. Weinberg & Jeffrey M. Lacker
Working Paper 94-9
Released: July 1994

We reexamine the core in the adverse selection insurance economy first studied by Rothschild and Stiglitz (1976). Defining blocking in a way that takes private information into account, the core is sometimes empty. We define the coalition-proof core as...



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Forecasts of Inflation from VAR Models
By Roy H. Webb
Working Paper 94-8
Released: July 1994

Why are forecasts of inflation from VAR models so much worse then their forecasts of real variables? This paper documents that relatively poor performance, and finds that the price equation of a VAR model fitted to U.S. postwar data is poorly sp...

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Money and the Gain from Enduring Relationships in the Turnpike Model
By Peter N. Ireland
Working Paper 94-7
Released: June 1994

This paper presents a stochastic version of Townsend's turnpike model in which the aggregate endowment is distributed randomly between two sets of agents and in which agents of each type are allowed to remain at a trading post for multiple periods. ...

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Commercial Real Estate Overbuilding in the 1980's: Beyond the Hog Cycle
By Raymond E. Owens
Working Paper 94-6
Released: May 1994

Overbuilding in commercial real estate in the 1980s is commonly viewed as an example of a speculative bubble. This paper questions that view and proposes an environment in which overbuilding could occur as a rational response to fiscal policy in the ...



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Money, Banking, and Capital Formation
By Bruce D. Smith & Stacey L. Schreft
Working Paper 94-5
Released: May 1994

We consider a monetary growth model in which banks arise to provide liquidity. In addition, there is a government that issues not only money, but interest-bearing bonds; these bonds compete with capital in private portfolios. When the government fixes a...

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The Welfare Cost of Inflation in General Equilibrium
By Peter N. Ireland & Michael Dotsey
Working Paper 94-4
Released: March 1994

This paper presents a general equilibrium monetary model in which inflation distorts a variety of marginal decisions. Although individually none of the distortions is very large, they combine to yield substantial welfare cost estimates. A sustained 4%...

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The Effects of Fiscal Policy in a Neoclassical Growth Model
By Ching-Sheng Mao & Michael Dotsey
Working Paper 94-3
Released: February 1994

This paper studies the effects of fiscal policies--depicted as stochastic changes in government spending and distortionary tax rates--when the government is constrained from using lump sum taxes for achieving intertemporal budget balance. The ratio of...



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Early Development
By John McDermott & Marvin Goodfriend
Working Paper 94-2
Released: January 1994

Long-term economic development involves four fundamental processes: the exploitation of increasing returns to specialization, the transition from household to market production, knowledge and human capital accumulation, and industrialization. In this...

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Variance Properties of Solow's Productivity Residual and Their Cyclical Implications
By Mary G. Finn
Working Paper 94-1
Released: February 1994

For the United States economy (1960-1989), the correlation between the growth rates of the Solow residual and the real price of energy (government spending) is -0.55 (0.09). The Solow residual confounds movements in energy prices and government spending...

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