![]() In our model, bank deposits and CBDC are competing medium of exchange and are both competing assets of domestic and foreign bonds. We develop a two-agent dynamic stochastic general equilibrium (DSGE) model with an adjustable CBDC interest rate as a secondary instrument and a policy interest rate as a primary instrument. A domestic CBDC monetary policy gives monetary autonomy to achieve price stability while allowing the central bank to stabilize exchange rates via policy interest rate. This paper shows that the design choice of an adjustable CBDC interest rate allows the central bank to relax the trilemma. Adjustable CBDC Interest Rate: Easing the Macroeconomic Trilemma (E5, F3)Ĭentral banks in open economies are constrained by the macroeconomic trilemma where the objectives of exchange rate stability, monetary independence and capital mobility cannot be achieved together. The changing distribution of GDP is thus a more plausible explanation for small estimates of historical living standards than downward biases in CPI. Using US World Klems data, this decomposition demonstrates the volume of a representative 1947 product, weighted by nominal output shares, grew 1pp slower per year than the average 2014 product, despite a lower inflation rate for the 1947 product. The correction addresses a long-standing issue concerning estimates for historical real GDP growth, since the comparability of output in the past to output today is a function of their cross-entropy. Over time, the cross-entropy of GDP with respect to a benchmark captures the change in its distribution, analogous to `information loss' - the degree of representation - in price and volume indices across time. This paper proposes a decomposition of output growth between price and volume indices, plus the cross-entropy of GDP and weights assumed in constructing aggregate indices. A Quantitative Analysis of Relaxing UI Eligibility Requirements: Evidence from the Pandemic Unemployment Assistance (J6, E6) With financial constraints and heterogeneity across firms or sectors, a uniform policy, such as a single cap-and-trade system, is typically not optimal. Moreover, there should be no "grandfathering" of emission allowances. When a sector is not financially constrained in the aggregate, a cap that is below the Pigiouvian benchmark optimally shifts market share to less polluting firms and, The optimal cap is strictly above the Pigouvian benchmark and emission allowances should be allocated below market prices. When a sector is financially constrained in the aggregate, While a (Pigouvian) cap-and-trading system optimally governs both firms' abatement activities (internal emission margin) and industry size (external emission margin) when firms have sufficient funds on their own, external financing constraints introduce a wedge between these two objectives. We introduce emission externalities and industry equilibrium in the Holmstrom and Tirole (1997) workhorse model of corporate finance. ![]() This paper examines optimal environmental policy when external financing is costly for firms. ![]() A Corporate Finance Perspective on Environmental Regulation (Q5, G3) The empirical results suggest that the predictions of the model are clearly rejected. Based on the framework, empirical tests are performed on two predictions of the target zone model-the shape of the distribution and the conditional heteroskedasticity of the exchange rate inside the band. ![]() The findings show a strong nonlinear relationship between the exchange rate and its fundamentals, which is predicted by the target zone model, in most of these economies. The paper applies the framework to 20 countries, most of which are developing countries that have received little attention in existing studies on target zones. The structural changes may be adjustments of the basket of currencies on which the economy is pegged, changes in exchange rate flexibility, or exchange rate realignments. Based on the piecewise three-regime threshold autoregressive model, several types of structural changes in the target zone that an economy may experience over time are well captured by this framework. ![]() This paper develops a new econometric framework to deal with the challenge of high-dimensional problem in exchange rate target zone estimation when thresholds and structural breaks need to be identified simultaneously. ![]()
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