With a stochastic general equilibrium model, we highlight the role of both monetary policy and banks in determining the relationship between the federal funds rate and bank reserves. Monetary policy consists of a stochastic upward-sloping supply schedule for reserves, along with a discount...

This paper studies recent models of the liquidity effect of money on interest rates to determine if a systematic relationship between liquidity shocks and the economy could affect the average real interest rate.

A method to solve a standard version of a stochastic growth model is decribed. The method uses the equilibrium first-order condition (a Euler equation) and the linear least squares projection operator to construct a recursive mapping to compute the solution. At the solution, the marginal...

A pure endowment overlapping generations economy can be inefficient because of insufficient risk sharing. The introduction of an outside asset by a government or the existence of a clearing house can remedy the inefficiency by allowing some intergenerational risk sharing. While the typical...

The effects of stochastic inflation on equity prices and the equity premium are studied in a pure-endowment asset-pricing model with a cash-in-advance constraint. Stochastic inflation affects the equity premium through two channels: the assessment of an inflation tax and the presence of an...

Competitive equilibria in adverse selection economies with private information are generally studied in models with a market structure that has risk neutral firms, market segmentation and contract exclusivity. An alternative market structure closer to the standard Arrow-Debreu framework is...

Anonymity in the market place is a cornerstone of the standard competitive equilibrium framework in which agents are assumed to be price takers. Anonymity is formally incorporated into the model by assuming that the central planner is unable to determine who is who, even though the planner knows...