劳动市场摩擦与机会主义货币政策

本文在存在劳动市场摩擦的DSGE模型框架下考察机会主义货币政策的合理性。研究发现,当经济中存在显著的工资粘性、雇佣成本和搜寻匹配摩擦时,实行灵活通胀目标的机会主义货币政策在社会福利效果上优于以稳定通胀和产出缺口为目标的标准泰勒规则,并接近无约束最优政策的福利效果。因此在这些条件下,机会主义货币政策是中央银行合理的政策选择。     

Liquidity, redistribution, and the welfare cost of inflation

The long-run welfare costs of inflation are studied in a micro-founded model with trading frictions and costly liquidity management. By modelling the liquidity management decision, the model endogenizes the responses of velocity, output, the degree of market segmentation, and the distribution of money. Compared to the traditional estimates based on a representative agent model, the welfare costs of inflation are significantly smaller due to distributional effects of inflation. The welfare cost of increasing inflation from 0% to 10% is 0.62% of consumption for the US economy. Furthermore, the welfare cost is generally non-linear in the inflation rate.     

Purpose,profit and social pressure

We develop a model in which there are firms and employees who care about profit-sacrificing higher purpose (HP) and those who do not. Firms and employees search for each other in the labor market. Each firm chooses its HP investment. When there is no social pressure on firms to adopt a purpose, HP dissipates agency frictions, lowers wage costs, yet elicits higher employee effort in firms that intrinsically value the purpose. However, social pressure to invest in HP can distort the HP investments of all firms and reduce welfare by making all agents worse off. Applications of these results to banking are discussed.     

Optimal regulation,executive compensation and risk taking by financial institutions

We present an equilibrium model of financial institutions to examine the optimal regulation of risk taking. Shareholders provide incentives for management to increase risk to excessive levels. Regulators use caps on asset risk and compensation to achieve the socially optimal risk level. This level trades off costs of risk shifting and costs of bank default. Without regulation, equilibrium risk lies above the optimal level. If information and enforcement are perfect, either policy tool (caps on asset risk or compensation) achieves the optimal risk level. If there are frictions – if enforcement is limited, if there is uncertainty about the incentives facing management and costs of risk shifting, or if regulation cannot be bank specific – welfare can be improved by employing both policy tools.     

Political connection,market frictions and financial constraints: evidence from China

This paper studies the relationship between market frictions and political connections in determining financial constraints. We develop a novel index to measure the depth of political connections (PC) at the firm level and provide robust empirical evidence that firms in China actively build PC to alleviate the costs of market frictions. Specifically, we find that firms facing severe market frictions are not as financially constrained as expected. This is because these firms also possess strong PC, which alleviate the costs of market frictions. We find that market frictions can significantly affect financial constraints in Chinese firms, but only for those firms with modest levels of PC.     

Inflation dynamics with search frictions: A structural econometric analysis

The New Keynesian Phillips curve explains inflation dynamics as being driven by current and expected future real marginal costs. In competitive labor markets, the labor share can serve as a proxy for the latter. In this paper, we study the role of real marginal cost components implied by search frictions in the labor market. We construct a measure of real marginal costs by using newly available labor market data on worker finding rates. Over the business cycle, the measure is highly correlated with the labor share. Estimates of the Phillips curve using generalized method of moments reveal that the marginal cost measure remains significant, and that inflation dynamics are mainly driven by the forward-looking component. Bayesian estimation of the full New Keynesian model with search frictions helps us disentangle which shocks are driving the economy to generate the observed unit labor cost dynamics. We find that mark-up shocks are the dominant force in labor market fluctuations.     

Non-stationary Hours in a DSGE Model

The time series fit of dynamic stochastic general equilibrium (DSGE) models often suffers from restrictions on the long-run dynamics that are at odds with the data. Using Bayesian methods we estimate a stochastic growth model in which hours worked are stationary and a modified version with permanent labor supply shocks. If firms can freely adjust labor inputs, the data support the latter specification. Once we introduce frictions in terms of labor adjustment costs, the overall time series fit improves and the model specification in which labor supply shocks and hours worked are stationary is preferred.     

The (ir)relevance of real wage rigidity in the New Keynesian model with search frictions

We develop a New Keynesian model with search and matching frictions in the labor market. We show that the model generates counterfactual labor market dynamics. In particular, it fails to generate the negative correlation between vacancies and unemployment in the data, i.e., the Beveridge curve. Introducing real wage rigidity leads to a negative correlation, and increases the magnitude of labor market flows to more realistic values. However, inflation dynamics are only weakly affected by real wage rigidity. The reason is that labor market frictions give rise to long-run employment relationships. The measure of real marginal costs that is relevant for inflation in the Phillips curve contains a present value component that varies independently of the real wage.     

Optimal annuitization with imperfect information about insolvency risk

Even the highest‐rated life‐annuity providers have a nonzero probability of becoming insolvent during an annuitant's retirement, and many potential annuitants are unaware of the state guaranty associations (SGAs) which provide insurance against the associated financial consequences. We study the theoretical implications of insolvency risk—real and perceived—for annuitization. Then, using a disciplined calibration of annuitant misperceptions in a standard life cycle model, we show that even the modest perceived risk of default associated with highly‐rated providers can—absent awareness of the SGAs—reduce annuitization and significantly reduce welfare. We further consider the implications of information frictions which prevent retirees from discerning true insolvency risk and we find that these frictions have plausibly large additional quantitative implications for annuitization and welfare. Simulations of our model further suggest that the general lack of awareness of the SGA backstop by potential annuitants can erode a sizable fraction of the potential welfare benefits thereof.     

The effect of financial repression and enforcement on entrepreneurship and economic development

A general equilibrium model with heterogeneous agents (with respect to wealth and ability) shows that differences across countries in intermediation costs and enforcement generate differences in occupational choice, firm size, credit, output and income inequality. Counterfactual experiments are performed for Latin American, European, transition and high growth Asian countries, with empirical estimates of each country's financial frictions and United States values for all other parameters. The results isolate the quantitative effect of these financial frictions in explaining the performance gap between each country and the United States, and depend critically on whether a general equilibrium factor price effect is operative.     

Dynamic credit relationships in general equilibrium

We construct a general equilibrium model with private information in which borrowers and lenders enter into long-term dynamic credit relationships. Each new generation of ex ante identical individuals is divided in equilibrium into workers and entrepreneurs. Workers save through financial intermediaries in the form of interest-bearing deposits and supply labor to entrepreneurs in a competitive labor market. Entrepreneurs borrow from financial intermediaries to finance projects which produce privately observed sequences of random returns. Each financial intermediary holds deposits from a large number of workers and operates a portfolio of dynamic contracts with different credit positions. We calibrate the model to the U.S. economy and find that dynamic contracting is very effective at mitigating the effects of private information. Moreover, restricting borrowers and lenders to use static (one-period) contracts with a costly monitoring technology has adverse effects both on the level of aggregate economic activity and on individual welfare unless monitoring costs are very small. Finally, the optimal provision of intertemporal incentives leads to increasing consumption inequality over time within generational cohorts as in U.S. data.     

Macroprudential regulation,credit spreads and the role of monetary policy

We study the macroprudential roles of bank capital regulation and monetary policy in a borrowing cost channel model with endogenous financial frictions, driven by credit risk, bank losses and bank capital costs. These frictions induce financial accelerator mechanisms and motivate the examination of a macroprudential toolkit. Following credit shocks, countercyclical regulation is more effective than monetary policy in promoting price, financial and macroeconomic stability. For supply shocks, combining macroprudential regulation with a stronger anti-inflationary policy stance is optimal. The findings emphasize the importance of the Basel III accords in alleviating the output-inflation trade-off faced by central banks, and cast doubt on the desirability of conventional (and unconventional) Taylor rules during periods of financial distress.     

Financial Crises and Recapitalizations

We develop a dynamic stochastic general equilibrium model with financial frictions on both financial intermediaries and goods‐producing firms. Since financial intermediaries are highly leveraged, we show that the welfare gains from their recapitalization in response to large but rare net worth losses are as large as those from eliminating typical business cycle fluctuations. We also find that these gains are increasing in the size of the net worth loss, are larger when recapitalization funds are raised from the household rather than the real sector, and can be larger when lower idiosyncratic risk leads to higher leverage.     

Optimal Monetary Policy Rules and House Prices: The Role of Financial Frictions

We probe the scope for reacting to house prices in simple and implementable monetary policy rules, using a New Keynesian model with a housing sector and financial frictions on the household side. We show that the social‐welfare‐maximizing monetary policy rule features a reaction to house price variations, when the latter are generated by housing demand or financial shocks. The sign and size of the reaction crucially depend on the degree of financial frictions in the economy. When the share of constrained agents is relatively small, the optimal reaction is negative, implying that the central bank must move the policy rate in the opposite direction with respect to house prices. However, when the economy is characterized by a sufficiently high average loan‐to‐value ratio, then it becomes optimal to counter house price increases by raising the policy rate.     

Can real options explain financing behavior?

Trade-off models commonly invoke financial transaction costs in order to explain observed leverage fluctuations. This paper offers an alternative explanation based on real options. The model is frictionless on the financing side but incorporates irreversibility and fixed costs of investment. Results obtained from simulating the model are broadly consistent with observed financing patterns. Market leverage ratios are negatively related to profitability, mean-reverting, and depend on past stock returns. The gradual and lumpy leverage adjustments can occur in the absence of financial transaction costs. This evidence shows that incorporating real frictions into structural models increases their explanatory power.     

Banking in a Matching Model of Money and Capital

We introduce banks in a model of money and capital with trading frictions. Banks offer demand deposit contracts and hold primary assets to maximize depositors’ utility. If banks’ operating costs are small, banks reallocate liquidity eliminating idle balances and improving the allocation. At moderate costs, idle balances are reduced but not eliminated. At larger costs, banks are redundant. A central bank policy of paying interest on bank reserves can reverse inflation's distortionary effects, and increase welfare, but only when costs are small. The threshold levels of banks’ costs increase with inflation, suggesting inflation and banks’ utilization are positively associated.     

Can enforcement constraints explain the patterns of capital flows after financial liberalizations?

A standard, small open economy model would have problems accounting for the pattern of capital flows into capital-poor economies that open to the rest of the world: such types of models would predict extremely large and very sudden capital flows, putting these predictions at odds with the data. While the bulk of the literature has focused on the role of inputs frictions to produce slower capital flows, this article presents an exploration into the role of financial frictions (in particular, enforcement constraints) to produce endogenously slow capital flows. We are left with three main findings. First, enforcement constraints are helpful frictions for producing slow capital flows. However, these flows do not exhibit the degree of persistence observed in the data. Finally, when we extend our model to mimic declining values of financial autarky, the model is able to produce more persistent capital inflows that are more in line with the data. Although these deficits revert into surpluses more quickly than in the data, we are left with a finding that leads to a promising line of research: models that include endogenously increasing costs of defaulting are better suited to reproduce the patterns of capital flows into opening economies.     

How do labor adjustment costs affect corporate tax planning? Evidence from labor skills

Labor adjustment costs (LACs) are a broad concept and involve costs incurred to search, hire, train, retain, and fire employees. Using the level of labor skills as a proxy for LACs, I find that higher LACs are associated with greater tax savings. The effect is stronger for firms facing more intense competition, and firms in states that strengthen labor protection, but weaker for firms in states that restrain labor mobility. High-LAC firms avoid taxes in order to generate precautionary cash. Collectively, the evidence indicates a significant influence of frictions in labor markets (i.e., LACs) on corporate tax planning behavior.     

Labor market reform and price stability: An application to the Euro Area

Central bankers frequently suggest that labor market reform may be beneficial for inflation management. This paper investigates this topic by simulating the effects of reductions in firing costs and unemployment benefits on inflation volatility in the Euro Area, using an estimated New Keynesian model with search and matching frictions. Qualitatively, changes in labor market policies alter the volatility of inflation in response to shocks, by affecting the volatility of the three components of real marginal costs (hiring costs, firing costs and wage costs). Quantitatively, we find, however, that neither policy is likely to have an important effect on inflation volatility, due to the small contribution of hiring and firing costs to inflation dynamics.     

International transmission of financial shocks in an estimated DSGE model

This paper investigates the transmission of financial shocks across large economies. To quantify these effects, we estimate a two-region open economy DSGE model that includes frictions in credit markets. The baseline model fails to replicate the high correlation between the U.S. and Euro Area macroeconomic variables. Allowing for an ad hoc, cross-regional correlation in financial shocks considerably improves the model's ability to match the data. We extend the baseline model by including global banks, and generate an endogenous cross-regional correlation of borrowing costs. Simulations demonstrate large spillover effects, and highlight the importance of including frictions in international financial contracts for more accurately capturing the high cross-regional correlation.