Inflation, reserve requirements, and real interest rates with direct and indirect loan markets

Article Abstract:

The long-term behavior of bank inflation rates was examined in an overlapping generations model incorporating direct and indirect lending. Accretions in the inflation rate increases bank taxes because of their reserve requirements, which results in lower deposit rates. In this situation, depositors will shift from bank deposits to direct lending while depositors will augment their consumption, thereby increasing loan rates.

Bank reserves

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Contract duration, inflation uncertainty, and the welfare effects of inflation

Article Abstract:

An addendum is presented to the theory that higher inflation creates a higher level of inflation uncertainty and is therefore more costly. The authors posit that a relative measure is needed to calculate the impact of inflation uncertainty on welfare, as it is still possible for welfare to increase even under high inflation uncertainty; an example using a contract duration model is discussed.

United States, Analysis, Contracts, Welfare economics

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The long-run variance of output and inflation under alternative monetary policy rules

Article Abstract:

The Federal Reserve System is assumed to adopt an optimal policy rule in establishing the trade-off levels between economic development and inflation variances. The trade-off assumes social loss minimization and also accounts for the impact of alternative policy rules. The trade-off factor has limited range, indicating a need to consider interest rate smoothing over money growth targeting.

Economic policy, Economic development, United States. Federal Reserve Board

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