Credit effects in the monetary mechanism : commentary

Paper for a conference sponsored by the Federal Reserve Bank of New York entitled Financial Innovation and Monetary TransmissionCredit ; Monetary policy

Means for accommodating large overstrain in lead wires

An electrical wire is reported along whose length loops are formed at intervals and retained in a plastic capsule that allows unfolding of the loop when tension is exerted on the opposite ends of the wire. The capsule is formed by encompassing each loop with a sleeve of heat shrinkable synthetic plastic material which overlaps the loop and heat shrinking the overlapping portions. Thus, a length of electrical wire is formed which stores extra lengths of wire in the quantity needed to match the expected stretching of materials or elements such as ropes, cords and the like of high elongation to which the electrical wire may be attached

A Note on Inflation Persistence

Macroeconomists have for some time been aware that the New Keynesian Phillips curve, though highly popular in the literature, cannot explain the persistence observed in actual inflation. We argue that two of the more prominent alternative formulations, the Fuhrer and Moore (1995) relative contracting model and the Blanchard and Katz (1999) reservation wage conjecture, are highly problematic. Fuhrer and Moore (1995)'s formulation generates inflation persistence, but this is a consequence of their assuming that workers care about the past real wages of other workers. Making the more reasonable assumption that workers care about the current real wages of other workers, one obtains the standard formulation with no inflation persistence. The Blanchard and Katz conjecture turns out to imply that inflation depends negatively on itself lagged, i.e. the opposite of the empirical regularity.

Coordination, Fair Treatment and Inflation Persistence

Most wage-contracting models with rational expectations fail to replicate the persistence in inflation observed in the data. We argue that coordination problems and multiple equilibria are the keys to explaining inflation persistence. We develop a wage-contracting model in which workers are concerned about being treated fairly. This model generates a continuum of equilibria (consistent with a range for the rate of unemployment), where workers want to match the wage set by other workers. If workers' expectations are based on the past behavior of wage growth, these beliefs will be self-fulfilling and thus rational. Based on quarterly U.S. data over the period 1955-2000, we find evidence that inflation is more persistent between unemployment rates of 4.7 and 6.5 percent, than outside these bounds, as predicted by our model.

Multistage, multiband and sequential imagery to identify and quantify non-forest vegetation resources

Earth Resources photographs from Apollo 6, 7, and 9 and photographs taken during Gemini 4, were used in the research along with high altitude and conventional aerial photography. A unified land use and resource analysis system was devised and used to develop a mapping legend. The natural vegetation, land use, macrorelief, and landforms of northern Maricopa County, Arizona, were analyzed and inventoried. This inventory was interpreted in relation to the critical problem of urban expansion and agricultural production in the study area. The central thrust of the research program has been to develop methods for use of space and small-scale, high-altitude aerial photography to develop information for land use planning and resource allocation decisions

How do private firms use credit lines?

The authors find that firms that face higher upfront commitment fees, risk premium spreads or usage fees have smaller credit lines, while those with higher overdraft fees have larger ones. Firms with greater profit growth in the past have larger credit lines, while those with more internal funds or higher volatility in profit growth have smaller credit lines. The results for line utilization are quite similar.Corporations - Finance ; Credit ; Loans

Cross-border diversification in bank asset portfolios

Taking the mean-variance portfolio model as a benchmark, we compute the optimally diversified portfolio for banks located in France, Germany, the U.K., and the U.S. under different assumptions about currency hedging. We compare these optimal portfolios to the actual cross-border assets of banks from 1995-1999 and try to explain the deviations. We find that banks over-invest domestically to a considerable extent and that cross-border diversification entails considerable gain. Banks underweight countries which are culturally less similar or have capital controls in place. Capital controls have a strong impact on the degree of underinvestment whereas less political risk increases the degree of over-investment. JEL Classification: G21, G11, E44, F40International banking, international integration, portfolio diversification

Cross-Border Diversification in Bank Asset Portfolios

Taking the mean-variance portfolio model as a benchmark, we compute the optimally diversified portfolio for banks located in France, Germany, the U.K., and the U.S. under different assumptions about currency hedging. We compare these optimal portfolios to the actual cross-border assets of banks from 1995-1999 and try to explain the deviations. We find that banks over-invest domestically to a considerable extent and that cross-border diversification entails considerable gain. Banks underweight countries which are culturally less similar or have capital controls in place. Capital controls have a strong impact on the degree of underinvestment whereas less political risk increases the degree of over-investment.international banking, portfolio diversification, international integration