FEDERAL RESERVE BANK OF SAN FRANCISCO
WORKING PAPER SERIES
Measuring the Effect of the Zero Lower Bound
on Medium and LongerTerm Interest Rates
Eric T. Swanson
Federal Reserve Bank of San Francisco
and
John C. Williams
Federal Reserve Bank of San Franci
228
Solutions to Chapter 10
(i) L ^ ^ y  y * )
2
'
or simply
E
2
Vy)T
a
2
V
4(y*y)
2
'
+^y*y) ,
2a
2
2
V
2
( 2) L ^ 4 ( y *  y ) l A
2
2
_
a
Output equals y i n e quilibrium, regardless o f the value of a. Thus to see how the e quilibrium loss varie
S OLUTIONS T O C HAPTER 11
P roblem 11.1
(a) ( i) T aking the time derivative of d (t) = D (t)/Y(t) gives us
D(t)Y(t)D(t)Y(t)
(1) d (t) = Y(ty
Substituting D (t) = 5 (t)  the rate o f change o f the amount of debt outstanding equals the budget deficit

NoArbitrage Taylor Rules with Switching Regimes
Haitao Li , Tao Li , and Cindy Yu
June 2011
ABSTRACT
We develop a continuoustime regimeswitching model for the term structure of interest rates,
in which the spot rate follows the Taylor rule, and governm
Journal of Economic PerspectivesVolume 17, Number 4 Fall 2003Pages 99 118
The Mirage of Exchange Rate Regimes
for Emerging Market Countries
Guillermo A. Calvo and Frederic S. Mishkin
I
n recent years, a number of emerging market countries have experienced
NBER WORKING PAPER SERIES
MEASURING THE OUTPUT RESPONSES TO FISCAL POLICY
Alan J. Auerbach
Yuriy Gorodnichenko
Working Paper 16311
http:/www.nber.org/papers/w16311
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
August 2
J ournal of Economic Literature
Vol. XXXVII ( December 1999 ), p p. 16611707
Clarida, Gal, Gertler: The Science of Monetary Policy
The Science of Monetary Policy:
A New Keynesian Perspective
Richard Clarida, Jordi Gal, a nd M ark Gertler 1
Having looked a
NBER WORKING PAPER SERIES
FROM FINANCIAL CRASH TO DEBT CRISIS
Carmen M. Reinhart
Kenneth S. Rogoff
Working Paper 15795
http:/www.nber.org/papers/w15795
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
March 2010
The autho
248
Solutions to Chapter 11
The case in which a is sufficiently small that d is negative for some values o f d is depicted on the lefthand side. In this case, d] is a stable equilibrium whereas d is not. I f the debttooutput ratio starts off
less than d
256
Solutions to Chapter 11
( d) Since all voters prefer D = 0, so does the median voter and thus the policymaker w ill pursue a
balanced budget p olicy and not issue any debt.
(e) A balancedbudget requirement forces D = 0 for everyone. Without a require
2 60
Solutions to Chapter 1 1
The increase in B causes the probability o f reform to fall.
I f initially V '(X) at X = A was negative and the rise in B is small enough, it will continue to be negative.
There w ill be no effect on workers' offer, which con
Solutions to Chapter 10
239
policymaker. Thus both policymakers have the same choice set. The "a" policymaker makes her choice
to maximize true social welfare, whereas the " a' " policymaker makes her choice to maximize something
else. Thus social welfare
262
Solutions to Chapter 11
[ B  ( X *  C ) ] [ ( W  T ) + X *]
B(X*C)
+ 1
(C),
BA
BA
w hich can be rewritten as
n W Y
[B(X*C)](WT) [B(X*C)]X*
[A(X*C)]C
(V) V (X*) =
;
+
;
+
BA
BA
BA
(8) V ( X * ) =
i
For capitalists, i f n turns out t
Solutions to Chapter 11
261
As in the model in the text, there are two possibilities. First, the workers may choose a value of X in the
interior o f [A + C , B + C] so that the probability o f the capitalists accepting the proposal is strictly
between zer
1
/
1
The CAPM : M ostl y Cook bo ok W it h Expl anat i ons
(Welch,Chapter09)
IvoWelch
UCLA Anderson School, Finance 408
January1,2012
Did you bring your calculator? Did you read the chapter ahead of time?
Maintained Assumptions
In this part (consisting o
Chapter 24
I N F L A T I O N STABILIZATION A N D B O P C R I S E S IN
DEVELOPING
COUNTRIES
*
G UILLERMO A . CALVO
University of Maryland
CARLOS A . VEGH*
UCLA
C ontents
A bstract
Keywords
1. Introduction
2. Understanding chronic inflation
2.1.
2.2.
2.3.
2
Solutions to Chapter 11
257
since U ' () > 0 and U "() < 0. Thus a fall in n increases D . Thus the policymaker issues more debt
and increases purchases i n period two after the news that it is less l ikely that the period3 median voter
also prefers m il
23 8
Solutions to Chapter 10
(11) o  ^ E t y ]  ^ ,
and
(12) Etf] = a +y .
Substituting equations (11) and (12) into equation (8) gives us the following expected value o f the true
social welfare function:
2
y2
2
2
(13) E [ W
SOC
22
]= yy ^a
+
Y
2
^(a
254
Solutions to Chapter 11
Problem 11.7
Since the real interest rate is assumed to be zero, the period1 policymaker has no interest payments on
the initial debt, D 0 . Thus the periodl budget constraint remains
(1) M , + N , = W + D ,
where W is the ec
For release on delivery
9:30 a.m. EDT (8:30 a.m. CDT)
May 10, 2013
Monitoring the Financial System
Remarks by
Ben S. Bernanke
Chairman
Board of Governors of the Federal Reserve System
at the
49th Annual Conference on Bank Structure and Competition
sponsor
250
Solutions to Chapter 11
Problem 11.3
I n the Barro taxsmoothing model in which output and the real interest rate are constant, the government
finds i t optimal to set taxes equal to a constant such that its budget constraint is satisfied w ith equali
Solutions to Chapter 11
255
period1 policymaker therefore has an incentive to reduce resources available in the second period by
transferring resources from the second period to the first period by borrowing.
There is, however, also a chance that the per
Solutions to Chapter 10
237
public's estimate of n . Equation (18) says that i f the variance of the policymaker's taste for inflation,
CT , is very large relative to the variance of the random shocks, a , P will be close to one. The public
will attribute
Solutions t o Chapter 10
i
i?i
(19) c o v [ ( i cfw_ ,  i J X ( i f  i ! ) ] = c o v [ k ( k  l ) A m + k E
+
t
227
k(kl)Am,
t+]
,
L
Since 8 is white noise and v ar(Am,) = <r , we have
E2
,
i
2
l
k (kl)
(20) c o v [ ( i ;  i cfw_ ) , ( i  i  ) ] =
Appropriate Growth Policy: A Unifying Framework
Philippe Aghion
Peter Howitt
Harvard University
Brown University
paghion@fas.harvard.edu
peter_howitt@brown.edu
December 8, 2005
JEL codes: O20, O30, O40
Acknowledgements: The 2005 Joseph Schumpeter Lecture,