|
Economic Research Working Papers
Working papers from the Federal
Reserve Bank of Dallas are preliminary drafts circulated
for professional comment.
2008
| 2007
| 2006
| 2005
| 2004
| 2003
| 2002
| 2001
| 2000
| 1999
| 1998
and earlier
1999 Working Papers
9914
Does
the Choice of Nominal Anchor Matter? 
Center for Latin American Economics Working Paper 0499
David M. Gould
The conventional wisdom on nominal
anchors is that exchange rate-based inflation stabilizations
lead to economic booms while monetary-based stabilizations
lead to recessions. This study finds strong evidence
against this view. Rather than determining the path
of economic growth, the choice of nominal anchor appears
to be endogenously determined by the state of the economy.
To peg or manage the exchange rate, a high level of
international reserves is important, especially when
a government’s credibility is low after a period of
high inflation. After controlling for the level of international
reserves and the rate of inflation, growth after monetary-based
stabilizations does not significantly differ from that
following exchange rate-based stabilizations.
9913
Is
Foreign-Currency Indexed Debt a Commitment Technology?
Some Evidence from Brazil and Mexico
Center for Latin American Economics Working Paper 0299
William C. Gruben and Darryl McLeod
We examine the effects of foreign
currency-indexed debt upon inflationary expectations
in Brazil and Mexico. Conjecturing that markets will
view increasing overhangs of foreign currency-indexed
debt as a commitment technology that fiscally punishes
devaluation, we test whether increasing such overhangs
will attenuate the effect of monetary growth upon inflationary
expectations. We find some econometric confirmation
of these conjectures in both the Brazilian and Mexican
cases. Finding that the results are consistent with
the notion that increasing the share of dollar indexed
debt may also permit some temporary monetary independence
even under pegged exchange rate regimes, we present
some evidence of independent policy behavior during
periods when are model results would suggest it.
9912
Legal
Fee Restrictions, Moral Hazard, and Attorney Profits
Published, Journal of Law and Economics, 44(2), Part
I, October 2001.
Rudy Santore and Alan D. Viard
When attorney effort is unobservable
and certain other simplifying assumptions (such as risk
neutrality) hold, it is efficient for an attorney to
purchase the rights to a client's legal claim. However,
the American Bar Association Model Rules of Professional
Conduct prohibit this arrangement. We show that this
ethical restriction, which is formally equivalent to
requiring a minimum fixed fee of zero, can create economic
rents for attorneys, even though they continue to compete
along the contingent-fee dimension. The contingent fee
is not bid down to the zero-profit level, because such
a fee does not induce sufficient attorney effort. We
thereby provide a political economy explanation for
these restrictions.
9911
Oil
Price Shocks and the U.S. Economy: Where Does the Asymmetry
Originate?
Nathan S. Balke, Stephen P. A. Brown and Mine Yücel
9910
The
Role of Family Networks, Coyote Prices and the Rural
Economy in Migration from Western Mexico: 1965–1994
Pia M. Orrenius
The Mexico–U.S. wage gap
alone cannot explain the large increases in migration
from Mexico to the United States in the last three decades.
This paper explores three alternative migration determinants:
family migrant networks, the Mexican migrant-smuggling
(coyote) industry and the rural economy. The premise
of this paper is that successive cohorts of migrants
and an expanding coyote industry have led to declines
in the costs of migration partly through the formation
of networks, while the long-term decline of the rural
economy has led to increases in the gains to U.S. migration.
Using unique, source-country data collected by the Mexican
Migration Project from both migrant and non-migrant
households in western Mexico, this paper estimates how
the probability of migrating is influenced by the above
determinants in two ways. First, the effect of coyote
prices and economic output are estimated using an instrumental
variables strategy in which coyote prices are instrumented
for using border enforcement hours. Second, family network
effects are estimated controlling for individual fixed
effects. My findings suggest that sibling networks are
by far the most significant determinant of initial migration,
although falling coyote prices and worsened economic
conditions have also been significant push/pull factors
in out migration from western Mexico over this time
period.
9909
Central
Bank Responsibility, Seigniorage, and Welfare
Joseph H. Haslag and Joydeep Bhattacharya
Historically, countries have relied
on seigniorage. In this paper, we explore a set of features
in which a benevolent government will rely on seigniorage.
We use a simple overlapping generations model with return-dominated
money. Money is valued because of a reserve requirement.
The government has to raise a fixed amount of revenue
solely for the purposes of making transfers to the old.
It has two revenue-generating options: lump-sum taxes
(money creation) under the control of the treasury (central
bank). We restrict the amount of seigniorage collected
to be nonnegative and require that the government's
budget constraint be satisfied on a per-period basis.
Our question is, Can we find stationary monetary competitive
equilibria that are welfare maxima, given that the money
stock cannot contract? Computational experiments reveal,
somewhat surprisingly, that the answer is yes. Indeed,
in our setup, benevolent governments may require that
at least part, if not all, of the revenue be raised
via money creation.
9908
Autocracy,
Democracy, Bureaucracy, or Monopoly: Can You Judge a
Government by Its Size?
Stephen P.A. Brown and Jason L. Saving
9907
Bank
Structure, Capital Accumulation and Growth: A Simple
Macroeconomic Model
Revised March 2000, published Economic Theory, Vol 16,
2000, pp. 421–455
Mark G. Guzman
This paper analyzes the equilibrium
growth paths of two economies that are identical in
all respects, except for the organization of their financial
systems: in particular, one has a competitive banking
system and the other has a monopolistic banking system.
In addition, the sources of inefficiencies, as a result
of monopoly banking, and their relationship to the existence
of credit rationing are explored. Monopoly in banking
tends to depress the equilibrium law of motion for the
capital stock for either of two reasons. When credit
rationing exists, monopoly banks ration credit more
heavily than competitive banks. When credit is not rationed,
the existence of monopoly banking leads to excessive
monitoring of credit financed investment. Both of these
have adverse consequences for capital accumulation.
In addition, monopoly banking is more likely to lead
to credit rationing than is competitive banking. Finally,
the scope for development trap phenomena to arise is
considered under both a competitive and a monopolistic
banking system.
9906
Has
Monetary Policy Become Less Effective?
Joseph H. Haslag
High-powered money has been declining
relative to nominal GDP in the United States. Does the
ability of monetary policy to affect aggregate activity
decline as the money-income ratio falls? In this paper,
I specify simple model economy, examining the effects
that monetary policy actions and financial innovation
would have on the equilibrium money-income ratio. The
downward trend in the money-income ratio can be accounted
for by increasing inflation, falling reserve requirements,
or steady financial development. Whereas higher inflation
and falling reserve requirements would reduce the potency
of monetary policy, monetary policy's effects are invariant
to financial innovation.
9905
When
Does Financial Liberalization Make Banks Risky? An Empirical
Examination of Argentina, Canada and Mexico
Center for Latin American Economics Working Paper 0399
William C. Gruben, Jahyeong Koo and Robert R. Moore
In the literature on systemic
banking crises, two common themes are: (1) lack of market
discipline encourages risky lending and (2) financial
liberalization or privatization lead to risky lending.
However, there is evidence to suggest that neither financial
liberalization nor weak market discipline always precedes
risky lending. We test for depositor discipline and,
separately for post-liberalization or post-privatization
risky lending in Argentina, Canada, and Mexico. In the
countries without market discipline, lending risk increases
significantly in the wake of liberalization. Where depositors
discipline banks, banks neither behave riskily nor does
their risk increase in the wake of privatization.
9904
Privatization,
Competition, and Supercompetition in the Mexican Commercial
Banking System
Center for Latin American Economics Working Paper 0199
William C. Gruben and Robert P. McComb
9903
Core
Inflation: A Review of Some Conceptual Issues
Mark A. Wynne
This paper reviews various approaches
to the measurement of core inflation that have been
proposed in recent years. The objective is to determine
whether the European Central Bank (ECB) should pay special
attention to one or other of these measures in assessing
inflation developments in the euro area. I put particular
emphasis on the conceptual and practical problems that
arise in the measurement of core inflation, and propose
some criteria that could be used by the ECB to choose
a core inflation measure.
9902
Financial
Repression, Financial Development and Economic Growth
Joseph H. Haslag and Jahyeong Koo
In this paper, we examine the
empirical relationship between financial repression,
financial development, and growth. Theory has developed
in which financial repression and growth are linked.
The main contribution of this paper is to look at two
parts. First, what, if any, is the empirical link between
financial repression and growth, controlling for the
level of financial development. Second, is there an
empirical link between financial repression and financial
development?
9901
Seigniorage
in a Neoclassical Economy: Some Computational Results
Joydeep Bhattacharya and Joseph H. Haslag
In this paper, we consider a government
that executes a permanent open market sale. The government
is forced to eventually use money creation to pay for
the debt's expenses, choosing between changing either
the money growth rate (the inflation-tax rate) or the
reserve requirement ratio (the inflation-tax base).
We first derive conditions under which each of the two
second-best alternative policies are feasible in an
economy with neoclassical production. Armed with these
conditions, we ask the following question: Which monetary
policy action is better in a welfare sense? With neoclassical
production, monetary policy potentially has long-run
effects on the capital stock and the marginal product
of capital. The curvature of the production function
is crucial. The computational experiments show, somewhat
surprisingly, that a permanent increase in government
bonds is financed by either lower reserve requirements
or faster money growth. Accordingly, steady-state welfare
for all generations is higher under the reserve-requirement
policy.
1999 Center for Latin American Economics
Working Papers
0499 (Economic Research Working
Paper 9914)
Does
the Choice of Nominal Anchor Matter?
David M. Gould
The conventional wisdom
on nominal anchors is that exchange rate-based inflation
stabilizations lead to economic booms while monetary-based
stabilizations lead to recessions. This study finds
strong evidence against this view. Rather than determining
the path of economic growth, the choice of nominal anchor
appears to be endogenously determined by the state of
the economy. To peg or manage the exchange rate, a high
level of international reserves is important, especially
when a government's credibility is low after a period
of high inflation. After controlling for the level of
international reserves and the rate of inflation, growth
after monetary-based stabilizations does not significantly
differ from that following exchange rate-based stabilizations.
0399 (Economic Research Working
Paper 9905)
When
Does Financial Liberalization Make Banks Risky? An Empirical
Examination of Argentina, Canada and Mexico
William C. Gruben, Jahyeong Koo and Robert R. Moore
In the literature on systemic
banking crises, two common themes are: (1) lack of market
discipline encourages risky lending and (2) financial
liberalization or privatization lead to risky lending.
However, there is evidence to suggest that neither financial
liberalization nor weak market discipline always precedes
risky lending. We test for depositor discipline and,
separately for post-liberalization or post-privatization
risky lending in Argentina, Canada, and Mexico. In the
countries without market discipline, lending risk increases
significantly in the wake of liberalization. Where depositors
discipline banks, banks neither behave riskily nor does
their risk increase in the wake of privatization.
0299 (Economic Research Working
Paper 9913)
Is
Foreign-Currency Indexed Debt a Commitment Technology?
Some Evidence from Brazil and Mexico
William C. Gruben and Darryl McLeod
We examine the effects
of foreign currency-indexed debt upon inflationary expectations
in Brazil and Mexico. Conjecturing that markets will
view increasing overhangs of foreign currency-indexed
debt as a commitment technology that fiscally punishes
devaluation, we test whether increasing such overhangs
will attenuate the effect of monetary growth upon inflationary
expectations. We find some econometric confirmation
of these conjectures in both the Brazilian and Mexican
cases. Finding that the results are consistent with
the notion that increasing the share of dollar indexed
debt may also permit some temporary monetary independence
even under pegged exchange rate regimes, we present
some evidence of independent policy behavior during
periods when are model results would suggest it.
0199 (Economic Research Working
Paper 9904)
Privatization,
Competition, and Supercompetition in the Mexican Commercial
Banking System
William C. Gruben and Robert P. McComb
|
