Optimal Inflation Persistence: Ramsey Taxation with Capital and Habits

Ramsey models of fiscal and monetary policy with perfectly-competitive product markets and a fixed supply of capital predict highly volatile inflation with no serial correlation. In this paper, we show that an otherwise-standard Ramsey model that incorporates capital accumulation and habit persistence predicts highly persistent inflation. The result depends on increases in either the ability to smooth consumption or the preference for doing so. The effect operates through the Fisher relationship: a smoother profile of consumption implies a more persistent real interest rate, which in turn implies persistent optimal inflation. Our work complements a recent strand of the Ramsey literature based on models with nominal rigidities. In these models, inflation volatility is lower but continues to exhibit very little persistence. We quantify the effects of habit and capital on inflation persistence and also relate our findings to recent work on optimal fiscal policy with incomplete marketsOptimal fiscal and monetary policy, inflation persistence, Ramsey model, habit formation

Optimal Fiscal Policy with Endogenous Product Variety

We study Ramsey-optimal fiscal policy in an economy in which product varieties are the result of forward-looking investment decisions by firms. There are two main results. First, depending on the particular form of variety aggregation in preferences, firms' dividend payments may be either subsidized or taxed in the long run. This policy balances monopoly incentives for product creation with consumers' welfare benefit of product variety. In the most empirically relevant form of variety aggregation, socially efficient outcomes entail a substantial tax on dividend income, removing the incentive for over-accumulation of capital, which takes the form of variety. Second, optimal policy induces dramatically smaller, but efficient, fluctuations of both capital and labor markets than in a calibrated exogenous policy. Decentralization requires zero intertemporal distortions and constant static distortions over the cycle. The results relate to Ramsey theory, which we show by developing welfare-relevant concepts of efficiency that take into account product creation.

What do we know about chronic kidney disease in India: first report of the Indian CKD registry

<p>Abstract</p> <p>Background</p> <p>There are no national data on the magnitude and pattern of chronic kidney disease (CKD) in India. The Indian CKD Registry documents the demographics, etiological spectrum, practice patterns, variations and special characteristics.</p> <p>Methods</p> <p>Data was collected for this cross-sectional study in a standardized format according to predetermined criteria. Of the 52,273 adult patients, 35.5%, 27.9%, 25.6% and 11% patients came from South, North, West and East zones respectively.</p> <p>Results</p> <p>The mean age was 50.1 ± 14.6 years, with M:F ratio of 70:30. Patients from North Zone were younger and those from the East Zone older. Diabetic nephropathy was the commonest cause (31%), followed by CKD of undetermined etiology (16%), chronic glomerulonephritis (14%) and hypertensive nephrosclerosis (13%). About 48% cases presented in Stage V; they were younger than those in Stages III-IV. Diabetic nephropathy patients were older, more likely to present in earlier stages of CKD and had a higher frequency of males; whereas those with CKD of unexplained etiology were younger, had more females and more frequently presented in Stage V. Patients in lower income groups had more advanced CKD at presentation. Patients presenting to public sector hospitals were poorer, younger, and more frequently had CKD of unknown etiology.</p> <p>Conclusions</p> <p>This report confirms the emergence of diabetic nephropathy as the pre-eminent cause in India. Patients with CKD of unknown etiology are younger, poorer and more likely to present with advanced CKD. There were some geographic variations.</p

Firm Risk and Leverage-Based Business Cycles ∗

I exploit evidence on cyclical fluctuations in the cross-sectional dispersion of firm-level productivity to quantify how much volatility in borrowers ’ leverage ratios can be explained by “second-moment shocks. ” In a standard financial accelerator model, second-moment shocks lead to fluctuations in leverage an order of magnitude larger than due to standard “first-moment” TFP shocks. This result represents substantial improvement over baseline analyses of accelerator models, although it is still five times lower than the volatility of borrowers ’ (firms’) leverage ratios I document using Compustat data. In terms of macroeconomic aggregate quantities, pure dispersion shocks account for a small share of GDP fluctuations in the model, less than five percent. Depending on whether or not second-moment fluctuations are independent from or bundled with shocks to the mean level of productivity, the model also performs well in explaining either (but not both) the observed acyclicality of borrowers ’ leverage or the observed countercyclicality of firm-level dispersion. Overall, the mechanism the model articulates is conceptuall

Optimal fiscal and monetary policy with sticky wages and sticky prices

We determine the optimal degree of price inflation volatility when nominal wages are sticky and the government uses state-contingent inflation to finance government spending. We address this question in a well-understood Ramsey model of fiscal and monetary policy, in which the benevolent planner has access to labor income taxes, nominal riskless debt, and money creation. One main result is that sticky wages alone make price stability optimal in the face of government spending shocks, to a degree quantitatively similar as sticky prices alone. With productivity shocks also present, optimal inflation volatility is higher, but still dampened relative to the fully-flexible economy. Key for our results is an equilibrium restriction between nominal price inflation and nominal wage inflation that holds trivially in a Ramsey model featuring only sticky prices. We also show that the nominal interest rate can be used to indirectly tax the rents of monopolistic labor suppliers. Interestingly, a necessary condition for the ability to use the nominal interest rate for this purpose is positive producer profits. Taken together, our results uncover features of Ramsey fiscal and monetary policy in the presence of labor market imperfections that are widely-believed to be important.Inflation (Finance) - Mathematical models ; Monetary policy - Mathematical models ; Fiscal policy - Mathematical models