Optimal monetary policy under rational expectations with a micro-based supply function

Combination monetary policies to stabilize both price and output in the face of IS, LM, and supply shocks are examined in a typical macromodel with the aggregate supply function expanded to include the real interest rate. The major results are that different combination policies are required for price and for output stability for both IS and supply disturbances, while the Poole result still holds for LM shocks. We also find a combination policy which stabilizes price and output given both IS and supply disturbances. Pure policies cannot, in this more general framework, be ranked except for LM disturbances.     

The general equilibrium effects of the industrial property tax: Incidence and excess burden

A model of a small, open central business district (CBD) is used to derive the conditions that define the market-equilibrium and rent-maximizing CBD. It is shown that, in general, the market equilibrium CBD radius differs from the rent-maximizing CBD radius. Land-use zoning will, under certain conditions, increase the aggregate net return on CBD land.     

The general equilibrium effects of congestion externalities

This is the second in a series of three articles on the topic of congestion externalities. We use an urban general-equilibrium model to compute two types of cities: the market-equilibrium city, in which congestion externalities occur, and the optimum city. The optimum city has a more dispersed distribution of employment, and a more concentrated distribution of residence. If the population of the city is fixed, the optimum pricing of transportation generates a per capita welfare gain of $3.78 per week. If the population of the city is endogenous, the internalization of congestion externalities causes the city to grow.     

Perfect substitution in models of the CD market

As the CD market has become an important source of bank funds, it has also become an important market for policymakers to understand. So far, however, model builders have not recognized the significance of assuming that new and old CDs are perfect substitutes. Therefore, they have misused the assumption, discarded relevant data, and ignored evidence inconsistent with perfect substitution. This study shows that models of the CD market should not treat new and old issues as perfect substitutes and that they should not drop observations when market rates are above the Regulation Q ceiling.