Monetary Policy,Neutrality, and the Environment

We study the interaction between monetary/fiscal policies in a Ramsey–Sidrauski model augmented with the “Green Golden Rule.” We demonstrate conditions whereby monetary and fiscal policy under different utility and preference assumptions are or are not environmentally neutral. Despite its nonseparability in utility, we demonstrate that money is environmentally neutral. Policy impacts the environment via the marginal rate of transformation rather than the marginal rate of substitution between consumption and environment. Fiscal policies under a balanced budget are environmentally nonneutral. Only under a nonbalanced budget, when deficits are monetized, is money environmentally nonneutral. Under cash-in-advance and transactions costs, money is environmentally nonneutral.     

Changing Supply Elasticities and Regional Housing Booms

Developments in U.S. house prices over the past decade mirror those of the 1996–2006 boom. Construction activity has, however, been weak. Using data for 254 U.S. metropolitan areas, we show that housing supply elasticities have fallen markedly in recent years. We find that housing supply elasticities have declined more in areas in which land-use regulation has tightened the most, and in areas that experienced the sharpest housing busts. Consistent with the declining housing supply elasticities, we find that monetary policy shocks have had a stronger effect on house prices during the past decade than during the previous boom. At the same time, building permits respond less.     

Equilibrium Bitcoin Pricing

We offer a general equilibrium analysis of cryptocurrency pricing. The fundamental value of the cryptocurrency is its stream of net transactional benefits, which depend on its future prices. This implies that, in addition to fundamentals, equilibrium prices reflect sunspots. This in turn implies multiple equilibria and extrinsic volatility, that is, cryptocurrency prices fluctuate even when fundamentals are constant. To match our model to the data, we construct indices measuring the net transactional benefits of Bitcoin. In our calibration, part of the variations in Bitcoin returns reflects changes in net transactional benefits, but a larger share reflects extrinsic volatility.