LAND PRICE,COLLATERAL AND ECONOMIC GROWTH*

This paper extends Kiyotaki and Moore's (1997 ) to an endogenous growth model and investigates the dynamic properties of a growing economy with binding credit constraint when land is used not only as an input of production but also as collateral. There exists a balanced growth path in an economy with binding credit constraint. In response to a once and for all productivity shock, the developed model shows the propagation mechanism among output, capital, bank credit and the land price in terms of the growth rate. The model's tractability allows us to derive interesting qualitative and quantitative findings on business cycles.     

Money and inflation in Germany: A cointegration analysis

This paper analyses the relation between money and inflation in Germany in a cost-push/demand-pull model of an open small economy by means of cointegration methods. The full-information-maximum-likelihood method of Johansen as well as structural methods are applied to datasubsets and the full data set. The focus of the paper is on tests for overidentifying restrictions and for weak and strong exogeneity within these data sets. The result of the paper is that the money stock, the price level and gross national product are endogenous whereas the interest rate and the real import price are both weakly and strongly exogenous. By means of the price cointegration relation we illustrate how monetary targeting should react to imported inflation.     

Friedman meets Becker and Mulligan in a monetary neoclassical growth model

We study a neoclassical growth model with the time preference determined by resources spent on imagining future pleasures along the line of Becker and Mulligan (Q J Econ 112:729–758, 1997). We introduce money into the economy via a cash-in-advance constraint and study the effect of higher seignorage taxes or higher monetary growth rates on capital, consumption and welfare in the long run. We find that if the fraction of investment constrained by cash is smaller than a threshold, the negative-monetary-growth Friedman (The Optimum Quantity of Money and Other Essays, 1969) rule does not hold and the optimal inflation rate is positive. Calibrating our model yields a mild optimal inflation rate per annum with a switch from zero inflation to optimal inflation creating a sizable welfare gain in terms of consumption equivalence.     

Partial inflation indexation and long-run inflation targeting in a growing economy: A comparison of Calvo and Rotemberg pricing models

The observed 2% long run inflation target in most developed industrial nations is in variance with the zero or negative optimal inflation rates predicted by prominent monetary theories. Using a calibrated simple New-Keynesian model with endogenous growth and nominal rigidity, we compare two price setting environments of Calvo (1983) and Rotemberg (1982). In our growth model, the steady state welfare maximizing inflation takes into account the growth effect as well as the price distortionary effects of inflation. The long-run welfare maximizing trend inflation could be positive in economies with nominal rigidity in the form of partial inflation indexation and price stickiness. A higher degree of inflation indexation lowers the steady state price distortion in the Calvo model and steady state price adjustment cost in Rotemberg model and raises the long run optimal inflation. Since the productive inefficiency caused by partial inflation indexation is higher in Calvo economy compared to Rotemberg, the long run optimal trend inflation is higher in Rotemberg than in Calvo. In both models, a two percent long run inflation target is attainable for a reasonable degree of inflation indexation.     

The inflationary bias of real uncertainty and the harmonic Fisher equation

Summary. We argue that real uncertainty itself causes long-run nominal inflation. Consider an infinite horizon cash-in-advance economy with a representative agent and real uncertainty, modeled by independent, identically distributed endowments. Suppose the central bank fixes the nominal rate of interest. We show that the equilibrium long-run rate of inflation is strictly higher, on almost every path of endowment realizations, than it would be if the endowments were constant.Indeed, we present an explicit formula for the long-run rate of inflation, based on the famous Fisher equation. The Fisher equation says the short-run rate of inflation should equal the nominal rate of interest less the real rate of interest. The long-run Fisher equation for our stochastic economy is similar, but with the rate of inflation replaced by the harmonic mean of the growth rate of money.Received: 25 February 2005, Revised: 26 May 2005, JEL Classification Numbers: C7, C73, D81, E41, E58.An earlier version of this paper “Inflationary Bias in a Simple Stochastic Economy,” as a 2001 Cowles Foundation Discussion Paper No. 1333.     

劳动无限供给下中国的经济波动

本文构建了一个劳动力长期供给具有无限弹性的总供求模型,模型的核心特点是长期总供给曲线不是垂直而是向右上倾斜.根据该模型,本文认为,农业部门存在剩余劳动而使非农部门具有无限弹性的劳动供给,是改革开放以来中国经济波动出现"软着陆"、"紧缩增长"和"高增长低通胀"等现有理论难以解释的特殊现象的根本原因,并使经济波动对就业的影响主要表现为劳动力转移速度的波动而非城镇失业率的变化.     

The link between inflation and inflation uncertainty: Evidence from G7 countries

In this paper we adopt the Markov-switching heteroscedasticity model to analyse the inflation series for G7 countries and examine the interaction between inflation rate and its uncertainty over both the short- and long-run. It is found that the relationship between inflation and inflation uncertainty depends on whether the shock is permanent or transitory. The relationship also differs from country to country. High uncertainty about long-run inflation is associated with a significant positive shift in inflation for Canada, Germany, and Japan. High uncertainty about short-run inflation is associated with a significant positive shift in inflation for Germany and USA, and a significant negative shift in inflation for Canada. The modelling approach employed in this paper is empirically supported by various diagnostics including the Vuong test. We also derive the two components of the variance of inflation forecast for a particular forecast horizon. It is found that the inflation uncertainty increases at all horizons in the middle of 1970s and return to the low level in the middle of 1980s.First version received: June 2001/Final version received: October 2003We would like to thank three anonymous referees for many helpful comments and suggestions.     

Nominal uniqueness and money non-neutrality in the limit-price exchange process

We define continuous-time dynamics for exchange economies with fiat money. Traders have locally rational expectations, face a cash-in-advance constraint, and continuously adjust their short-run dominant strategy in a monetary strategic market game involving a double-auction with limit-price orders. Money has a positive value except on optimal rest-points where it becomes a ??veil?? and trade vanishes. Typically, there is a piecewise globally unique trade-and-price curve both in real and in nominal variables. Money is not neutral, either in the short-run or long-run and a localized version of the quantity theory of money holds in the short-run. An optimal money growth rate is derived, which enables monetary trade curves to converge towards Pareto optimal rest-points. Below this growth rate, the economy enters a (sub- optimal) liquidity trap where monetary policy is ineffective; above this threshold inflation rises. Finally, market liquidity, measured through the speed of real trades, can be linked to gains-to-trade, households?? expectations, and the quantity of circulating money.     

Optimal monetary policy and economic growth

A question at the center of many analyses of optimal monetary policy is, why do central banks never implement the Friedman rule? To the list of answers to this question, we add neoclassical production (specifically, the Tobin effect) as one possible explanation. To that end, we study an overlapping generations economy with capital where limited communication and stochastic relocation create an endogenous transactions role for fiat money. We assume a production function with a knowledge externality (Romer style) that nests economies with endogenous growth (AK form) and those with no long-run growth (the Diamond model). The Tobin effect is shown to be always operative. Under CRRA preferences, a mild degree of social increasing returns is sufficient (but not necessary) for some positive inflation to dominate zero inflation and for the Friedman rule to be sub-optimal, irrespective of the degree of risk aversion.     

Consumption taxation, social status and indeterminacy in models of endogenous growth with elastic labor supply

In this paper, we examine the effects of consumption taxation on long-run growth in an infinitely lived representative-agent model of endogenous growth with endogenous labor supply in which the desire for social status induces private agents to care about others’ wealth or consumption levels. This analysis shows that the increase in consumption taxation raises (reduces) the long-run growth rate when the equilibrium path is locally indeterminate (determinate), provided the desire for social status is not too strong in the relative wealth model. By contrast, in the consumption externalities model, the same result holds, if the Frisch labor supply and labor demand curves have the ‘normal’ slopes at their intersection point, while the result is reversed if these two curves have the ‘wrong’ slopes.     

Do currency undervaluations affect the impact of inflation on growth?

In this paper, we investigate how the level of currency undervaluations affects the effect of inflation on growth in a sample of 62 countries over the 1980–2015 period. While previous studies find a positive effect of an undervalued currency, we show that higher currency undervaluations reinforce the contractionary effect of inflation on growth. As an undervalued currency is associated with supplementary inflation pressures arising from a cost-push inflation phenomenon and economy overheating, growth is thus penalized. This result is shown to be robust to the exclusion of currency crises episodes from our sample, and dependent of the development level of countries. Specifically, it holds in the case of emerging countries, but not for developing economies. Consequently, policies based on undervaluations should not be encouraged for emerging economies as they tend to reinforce the contractionary effect of inflation on growth.     

融资约束与中国经济波动-新凯恩斯主义框架内的动态分析

本文在动态一般均衡框架内探讨投资融资约束冲击的动态特性,构建了一个新凯恩斯主义刚性价格模型,通过扩展传统的货币先行约束,引入投资的融资约束冲击。模型的动态结果很好地解释了数据中的发现。为了从理论上讨论货币政策规则应对该冲击的能力及其机理,我们分别模拟了不同参数的泰勒规则和货币供给规则,结果显示:盯住通货膨胀和产出缺口的货币政策能够较好地对冲投资融资约束冲击的负面影响。该理论结果为金融危机时期的中国货币政策提供了有益的建议。     

An empirical investigation of long-run growth in the UK

In this paper the long-run growth of the UK economy is analysed over the period 1855–1997, using a Markov-switching cointegration approach. We find that long-run economic growth can be explained by two permanent shocks, namely a technological shock and a labour supply shock. While technological progress seems to have a positive impact on the wage share and on income equality, the labour supply shock has the opposite effect, contributing to income inequality. Both shocks have a positive impact on aggregate output, but the bulk of long-run output growth variability is explained by the labour supply shock, suggesting that inequality is not harmful to growth.     

Does monetary policy affect the long-run expectations of non-stationary real interest rates?

In this article, we analyse whether the monetary policy affects the long-run expectation of the non-stationary real interest rate. The analysis is conducted through Beveridge–Nelson trend decomposition within a cointegrated vector autoregressive model based on the New Keynesian framework. We suggest an augmented test of the conventional co-integration test on the non-stationarity of the real interest rate, which checks whether the co-integration coefficient of inflation is one and the output gap affects the co-integration equilibrium of the nominal interest rate. We further suggest decomposing the long-run expectation of the non-stationary real interest rate into three trends: the interest rate shock (including the monetary shock), inflation shock and output gap shock. According to empirical analyses using monthly US data after the Korean War, the long-run expectation of the non-stationary real interest rate contains an interest rate shock trend and the impulse of the federal fund target rate induces a significant response of the interest rate shock trend. However, the interest rate shock trend has a very small portion of the long-run expectation of the non-stationary real interest rate, which may explain why the monetary policy was not particularly effective in the economic recovery after the global financial crisis.     

Is Social Security Really Bad for Growth?

This paper develops a model of endogenous growth with overlapping generations to investigate the joint determination of social security, public investment, and growth in a small open economy. We show that a pure pay-as-you-go system with benefits indexed to wages provides taxpayers with incentives to support growth-oriented policies, which increase the future productivity of labor. We find that outcomes characterized by positive levels of intergenerational redistribution, public investment, and long-run growth can be sustained as subgame-perfect Nash equilibria of an infinitely repeated intergenerational game, if and only if the marginal productivity of public capital is large enough. Furthermore, we show that transfers comove with public investment and growth. Journal of Economic Literature Classification Numbers: E62, H55.     

Indirect taxation and the welfare effects of altruism on the optimal fiscal policy

This paper analyzes the welfare effects of altruism on the optimal fiscal policy. The existence of positive bequests links present and future generations in the economy. We show that these altruistic links provide a new role for indirect taxation (consumption and estate taxes) with important welfare implications. We use three different altruistic approaches (warm-glow, dynastic, and family) to illustrate how the presence of bequests in the budget constraint of the donee gives the government the ability to use indirect taxation to mimic lump-sum taxes and to implement the first-best outcome in the long-run. This channel is not present in economies without altruism, such as the infinite-lived consumer economy or the overlapping generations economy, where long-run welfare is suboptimal and indirect taxation is irrelevant.     

中国通货膨胀驱动机制的货币主义新范式

现阶段中国的通货膨胀多被认为是结构型或者成本推动型通货膨胀。然而,本文的研究表明,二十世纪九十年代中后期以来货币扩张背景下的房地产价格上涨是通货膨胀的根本性驱动因素。本文分析框架基于莫尔兹（Meltzer）新货币主义学派的资产市场均衡理论,并结合存在供给与需求双向结构性失衡的拓展AS AD模型。本文认为,非市场化的利率决定机制与长期利率管制是我国货币扩张通过房地产价格向总体通货膨胀传导的金融制度基础。从通货膨胀治理的制度性安排来看,突破以需求管理为主导的现有模式,把供给与需求的均衡管理作为基础是当前更值得考虑的制度性抉择。     

Long-run impacts of inflation across sectors in a small sample of countries

This article investigates the long-run effects of inflation on economic output for 10 sectors of the economy, with a sample of 7 countries. The analysis is done using long-run restrictions in a vector autoregression and reports long-run multipliers with bootstrapped confidence bands. The results suggest that some sectors seem to be affected differently than others, as well as significant heterogeneity across countries. The results suggest the strongest effects in the low inflation countries Germany and Japan as has been found in similar studies. In contrast to research using growth regressions, the evidence suggests a positive long-run effect of inflation on output.     

A note on endogenous growth and scale effects

This paper reconciles the recent vs. very long-run evidence on scale effects in endogenous growth models by extending Howitt's (1999) model to include a subsistence constraint in consumption. Scale effects will be present only when this constraint is binding.     

Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration

This study examines the long-run causal relationship between government revenues and spending of the Swedish economy over the period 1722–2011. The results based on hidden cointegration technique and a modified version of the Granger non-causality test, show that there exists a long-run and asymmetric relationship between government spending and government revenues. Our estimation results can be summarized into three main empirical findings. First, the government follows a hard budget constraint and soft budget constraint strategies in the case of negative and positive shocks, respectively. Second, negative shocks to the fiscal budget are removed fairly quickly compared to positive shocks. Third, bi-directional causality between revenues and expenditures offers support in favor of the fiscal synchronization hypothesis. The policy implication is that budget deficit’s reduction could be achieved through government spending cut, accompanied by contemporaneous tax controls.