We describe a dynamic extension of Allen and Gale (1989)'s optimal security design model in which producers can tranche the stochastic cash flows they generate at a cost. Lowering security creation costs in that environment leads to more financial investment, but it has ambiguous effects on capital formation, output, and aggregate productivity. Much of the investment boom caused by increased securitization activities can, in fact, be spent on securitization costs and intermediation rents, with little or even negative effects on development and productivity.
We describe a dynamic extension of Allen and Gale (1989)'s optimal security design model in which producers can tranche the stochastic cash flows they generate at a cost. Lower tranching costs in that environment lead to capital deepening and raise aggregate output. The implications of lower tranching costs for TFP, on the other hand, are fundamentally ambiguous.
We develop a three-sector small open economy model, where wages in the nontraded and import competing sectors adjust slowly due to Taylor contracts, to study the impact of relative prices on Canadian GNP between 1928 and 1933.
Changes in the fraction of workers experiencing job separations can account for most of the increase in earnings dispersion that occurred both between, as well as within educational groups in the United States from the mid-1970s to the mid-1980s.
This Commentary examines the link between monetary policy and income and wealth inequality by reviewing the theoretical channels that have been proposed and examining the empirical evidence on their importance. The analysis suggests that the magnitude of any redistributive consequences of conventional monetary policy seems to be small. Evidence that unconventional monetary policies have led to increases in inequality is still inconclusive.
To deal with the high level of unemployment during the Great Recession, lawmakers extended the availability of unemployment benefits-all the way to 99 weeks in the states where unemployment was highest.
The Federal Open Market Committee (FOMC) has maintained an accommodative monetary policy ever since the 2007 recession, and some financial market participants are concerned that long-term interest rates may increase ...