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- Kotlikoff, Laurence J., et al.
(författare)
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Social Contracts as Assets : A Possible Solution to the Time-Consistency Problem
- 1987
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- This paper presents a new solution to the time-consistency problem that appears capable of enforcing ex ante policy in a variety of settings in which other enforcement mechanisms do not work. The solution involves formulating a social contract, institution, or agreement that specifies the optimal ex ante policy. The social contract is effectively sold by succesive old generations to successive young generations, who pay for the social contract through the payment of taxes. Both old and young generations have an economic incentive to fulfill the social contract. For the old generation, breaking the social contract makes the social contract valueless, and the generation suffers a capital loss by not being able to sell it. For the young generation the economic advantage of purchasing the existing social contract exceeds its price as well as the economic gain from setting up the a new social contract.
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| 6. |
- Persson, Torsten, et al.
(författare)
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Exchange Rate Variability and Asset Trade
- 1987
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- In popular discussion about the merits of different international monetary arrangements it is often maintained that increased exchange rate variability has a negative influence on international trade and foreign investment. This paper addresses a specific, but also a very basic, aspect of this general issue, namely the effect of exchange rate variability on capital flows and international portfolio diversification. More precisely, we examine how different monetary policies - and among those, policies that aim at stabilizing exchange rate - determine the risk characteristics of nominal assets, and how these risk characteristics in turn affect international portfolio composition and trade in assets, when international asset markets are incomplete.
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| 9. |
- Svensson, Lars E.O.
(författare)
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International Fiscal Policy Transmission
- 1986
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- The paper examines international transmission of stochastic fiscal policy disturbances in a two-country general equilibrium framework, with possible excess supply equilibria with underutilization of resources. Nominal goods prices are sticky, although optimally set by firms in monopolistic competition. Asset prices are flexible. Agents have rational expectations. The spillover effect on foreign output of a domestic fiscal expansion differs from the standard positive Mundell-Fleming one, and depends on whether home and foreign goods are Edgeworth-Pareto complements or substitutes, which in turn depends on the relative size of intertemporal and intratemporal elasticities of substitution in consumption.
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| 10. |
- Svensson, Lars E.O., et al.
(författare)
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International Transmission of Monetary Policy
- 1986
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Rapport (övrigt vetenskapligt/konstnärligt)abstract
- A new framework for the study of international transmission of policies is presented. A stochastic two-country neoclassical rational expectations model with sticky prices - although optimally set by monopolistically competitive firms - and possible excess capacity is developed. The model is used to examine international spillover effects in output of monetary disturbances. The Mundell-Fleming model, still the workhorse of international macroeconomics, predicts that a monetary expansion at home leads to a recession abroad. In contrast, the main result in this paper is that spillover effects of monetary policy may be either positive or negative, depending upon demand parameters, more precisely whether home and foreign goods are Edgeworth-Pareto complements or substitutes. The latter in turn depends on the relative size of intertemporal and intratemporal elasticities of substitution in consumption. Trade balance responses also depend on these parameters. The model in addition allows nominal and real interest rates, exchange rates, and other asset prices to be rigorously derived. The asset prices responses depend crucially on the information content of the shocks.
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