A model of optimal legal restrictions and open market operations
نویسنده
چکیده
This paper considers an asset model that generates a monetary equilibrium in which capital, government bonds, and fiat money are held as perfect substitutes. Due to a congestion effect, output per producer is a decreasing function of the aggregate capital stock, and this effect makes a legal restriction on capital accumulation welfare enhancing. The restriction considered is that the money to capital ratio must be at some level greater than that level existing in a monetary equilibrium. In this context an open market purchase of bonds will decrease the nominal interest rate, and inflation, but may increase or decrease the real interest rate. I also show that the optimal policy response to an exogenous increase in total factor productivity is for the monetary authority to undertake an open market purchase. The two changes together result in a decrease in inflation and the nominal interest rate, and an increase in the real interest rate. 2006 Elsevier Inc. All rights reserved. JEL classification: E4; E5
منابع مشابه
Cut-off Grade Optimization for Maximizing the Output Rate
In the open-pit mining, one of the first decisions that must be made in production planning stage, after completing the design of final pit limits, is determining of the processing plant cut-off grade. Since this grade has an essential effect on operations, choosing the optimum cut-off grade is of considerable importance. Different goals may be used for determining optimum cut-off grade. One of...
متن کاملMoney and Contracts
This paper presents a novel interpretation of the fact that high nominal interest rates accompany low levels of real GNP. It constructs a model in which money and bonds are both held as a result of legal restrictions on the banking system. Open market operations may increase the equilibrium rate of interest and raise the cost of credit. This increase in the cost of credit causes firms to write ...
متن کاملBarriers and restrictions on the activity of credit rating agencies of Tehran Secutities (in order to develop the capital market)
Abstract Credit ratings reflect the publisher's ability and willingness to fulfill its financial obligations fully and in a timely manner, leading to increased confidence in listed corporations (publishers). The main purpose of the plan is to identify and present the obstacles and limitation...
متن کاملDevelopment of a goal programming model for optimization of truck allocation in open pit mines
Truck and shovel operations comprise approximately 60% of the total operating costs in open pit mines. In order to increase productivity and reduce the cost of mining operations, it is essential to manage the equipment used with high efficiency. In this work, the chance-constrained goal programing (CCGP) model presented by Michalakopoulos and Panagiotou is developed to determine an optimal truc...
متن کاملA Mathematical Model for Flood Protection
Many regions in the world are protected against flooding by a dike, which may be either natural or artificial. We deal with a model for finding the optimal heights of such a dike in the future. It minimizes the sum of the investments costs for upgrading the dike in the future and the expected costs due to flooding. The model is highly nonlinear, nonconvex, and infinite-dimensional. Despite this...
متن کامل