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Kehoe, Patrick J.

Works: 147 works in 922 publications in 2 languages and 4,557 library holdings
Genres: History 
Roles: Author, Editor, Honoree
Classifications: HB1, 382.917
Publication Timeline
Publications about Patrick J Kehoe
Publications by Patrick J Kehoe
Most widely held works by Patrick J Kehoe
Modeling North American economic integration by Patrick J Kehoe( Book )
10 editions published in 1995 in English and Undetermined and held by 162 libraries worldwide
Can sticky price models generate volatile and persistent real exchange rates? by V. V Chari( Book )
33 editions published between 1996 and 2002 in English and held by 116 libraries worldwide
"The central puzzle in international business cycles is that fluctuations in real exchange rates are volatile and persistent. We quantify the popular story for real exchange rate fluctuations: they are generated by monetary shocks interacting with sticky goods prices. If prices are held fixed for at least one year, risk aversion is high, and preferences are separable in leisure, then real exchange rates generated by the model are as volatile as in the data and quite persistent, but less so than in the data. The main discrepancy between the model and the data, the consumption--real exchange rate anomaly, is that the model generates a high correlation between real exchange rates and the ratio of consumption across countries, while the data show no clear pattern between these variables."--Federal Reserve Bank of Minneapolis web site
Optimal fiscal and monetary policy by V. V Chari( Book )
26 editions published between 1991 and 1999 in English and Undetermined and held by 102 libraries worldwide
We provide an introduction to optimal fiscal and monetary policy using the primal approach to optimal taxation. We use this approach to address how fiscal and monetary policy should be set over the long run and over the business cycle. We find four substantive lessons for policymaking: Capital income taxes should be high initially and then roughly zero; tax rates on labor and consumption should be roughly constant; state-contingent taxes on assets should be used to provide insurance against adverse shocks; and monetary policy should be conducted so as to keep nominal interest rates close to zero. We begin optimal taxation in a static context. We then develop a general framework to analyze optimal fiscal policy. Finally, we analyze optimal monetary policy in three commonly used models of money: a cash-credit economy, a money-in-the-utility-function economy
Hot money by V. V Chari( Book )
20 editions published between 1997 and 2003 in English and held by 97 libraries worldwide
The conventional wisdom is that capital flows between developing countries and developed countries are more volatile than can be justified by fundamentals. In this paper we construct a simple model in which frictions in international financial markets in combination with standard debt-default problems lead to volatile capital flows. These flows act as tests of fire for borrowing countries. If a country survives this test, its reputation is enhanced and future capital flows become less volatile. Failing this test is associated with a loss of reputation and a decline in the amount of capital flows
Business cycle accounting by V. V Chari( Book )
26 editions published between 2003 and 2006 in English and held by 94 libraries worldwide
We propose and demonstrate a simple method for guiding researchers in developing quantitative models of economic fluctuations. We show that a large class of models are equivalent to a prototype growth model with time-varying wedges that resemble time-varying productivity, labor taxes, and capital income taxes. We use data to measure these wedges, called efficiency, labor, and investment wedges, and then feed their measured values back into the model. We assess the fraction of fluctuations in output, employment, and investment accounted for by these wedges during the Great Depression and the 1982 recession. For the Depression, the efficiency and labor wedges together account for essentially all of the fluctuations; investment wedges play no role. For the recession, the efficiency wedge plays the most important role; the other two, minor roles. These results are not sensitive to alternative measures of capital utilization or alternative labor supply elasticities
Sticky price models of the business cycle : can the contract multiplier solve the persistence problem? by V. V Chari( Book )
27 editions published between 1996 and 1998 in English and held by 93 libraries worldwide
Abstract: The purpose of this paper is to construct a quantitative equilibrium model with price setting and use it to ask whether staggered price setting can generate persistent output fluctuations following monetary shocks. We construct a business cycle version of a standard sticky price model in which imperfectly competitive firms set nominal prices in a staggered fashion. We assume that prices are exogenously sticky for a short period of time. Persistent output fluctuations require endogenous price stickiness in the sense that firms choose not to change prices very much when they can do so. We find the amount of endogenous stickiness to be small. As a result, we find that such a model cannot generate persistent movements in output following monetary shocks
Monetary shocks and real exchange rates in sticky price models of international business cycles by V. V Chari( Book )
20 editions published between 1996 and 1998 in English and held by 91 libraries worldwide
Abstract: The data show large and persistent deviations of real exchange rates from purchasing power parity. Recent work has shown that to a large extent these movements are driven by deviations from the law of one price for traded goods. In the data, real and nominal exchange rates are about 6 times as volatile as relative price levels and they both are highly persistent, with serial correlations of 0.85 and 0.83, respectively. This paper develops a sticky price model with price discriminating monopolists, which produces deviations from the law of one price for traded goods. Our benchmark model, which has prices set for one quarter at a time and a unit consumption elasticity of money demand, does not come close to reproducing these observations. A model which has producers setting prices for 6 quarters at a time and a consumption elasticity of money demand of 0.27 does much better. In it real and nominal exchange rates are about 3 times as volatile as relative price levels and exchange rates are persistent, with serial correlations of 0.65 and 0.66, respectively
Measuring organization capital by Andrew Atkeson( Book )
23 editions published between 2001 and 2002 in English and Dutch and held by 89 libraries worldwide
"Manufacturing plants have a clear life cycle: they are born small, grow substantially as they age, and eventually die. Economists have long thought that this life cycle is driven by the accumulation of plant-specific knowledge, here called organization capital. Theory suggests that where plants are in the life cycle determines the size of the payments, or dividends, plant owners receive from organization capital. These payments are compensation for the interest cost to plant owners of walting for their plants to grow. We build a quantitative growth model of the life cycle of plants and use it, along with U.S. data, to infer the overall size of these payments. They turn out to be quite large-more than one-third the size of the payments plant owners receive from physical capital, net of new investment, and more than 40% of payments from all forms of intangible capital."--Federal Reserve Bank of Minneapolis web site
The optimal degree of discretion in monetary policy by Susan Athey( Book )
32 editions published between 2002 and 2004 in English and held by 89 libraries worldwide
How much discretion should the monetary authority have in setting its policy? This question is analyzed in an economy with an agreed-upon social welfare function that depends on the randomly fluctuating state of the economy. The monetary authority has private information about that state. In the model, well-designed rules trade off society's desire to give the monetary authority discretion to react to its private information against society's need to guard against the time inconsistency problem arising from the temptation to stimulate the economy with unexpected inflation. Although this dynamic mechanism design problem seems complex, society can implement the optimal policy simply by legislating an inflation cap that specifies the highest allowable inflation rate. The more severe the time inconsistency problem, the more tightly the cap constrains policy and the smaller is the degree of discretion. As this problem becomes sufficiently severe, the optimal degree of discretion is none
Money, interest rates, and exchange rates with endogenously segmented asset markets by Fernando Alvarez( Book )
21 editions published between 1999 and 2000 in English and held by 81 libraries worldwide
This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only infrequently. When the government injects money through an open market operation, only those agents that are currently trading absorb these injections. Through their impact on these agents' consumption, these money injections affect real interest rates and real exchange rates. We show that the model generates the observed negative relation between expected inflation and real interest rates. With moderate amounts of segmentation, the model also generates other observed features of the data: persistent liquidity effects in interest rates and volatile and persistent exchange rates. A standard model with no fixed costs can produce none of these features
International business cycles : theory and evidence by David Backus( Book )
21 editions published between 1991 and 1993 in English and Undetermined and held by 81 libraries worldwide
We review recent work comparing properties of international business cycles with those of dynamic general equilibrium models, emphasizing two discrepancies between theory and data that we refer to as anomalies. The first is the consumption/output/productivity anomaly: in the data we generally find that the correlation across countries of output fluctuations is larger than the analogous consumption and productivity correlations. In theoretical economies we find, for a wide range of parameter values, that the consumption correlation exceeds the productivity and output correlations. The second anomaly concerns relative price movements: the standard deviation of the terms of trade is considerably larger in the data than it is in theoretical economies. We speculate on changes in theoretical structure that might bring theory and data closer together
The poverty of nations : a quantitative exploration by V. V Chari( Book )
15 editions published in 1996 in English and held by 79 libraries worldwide
We document regularities in the distribution of relative incomes and patterns of investment in countries and over time. We develop a quantitative version of the neoclassical growth model with a broad measure of capital in which investment decisions are affected by distortions. These distortions follow a stochastic process which is common to all countries. Our model generates a panel of outcomes which we compare to the data. In both the model and the data, there is greater mobility in relative incomes in the middle of the income distribution than at the extremes. The 10 fastest growing countries and the 10 slowest growing countries in the model have growth rates and investment-output ratios similar to those in the data. In both the model and the data, the miracle' countries have nonmonotonic investment-output ratios over time. The main quantitative discrepancy between the model and the data is that there is more persistence in growth rates of relative incomes in the model than in the data
The transition to a new economy after the Second Industrial Revolution by Andrew Atkeson( Book )
19 editions published between 2001 and 2003 in English and held by 79 libraries worldwide
Many view the period after the Second Industrial Revolution as a paradigmatic example of a transition to a new economy following a technological revolution and conjecture that this historical experience is useful for understanding other transitions, including that after the Information Technology Revolution. We build a model of diffusion and growth to study transitions. We quantify the learning process in our model using data on the life cycle of U.S. manufacturing plants. This model accounts quantitatively for the productivity paradox, the slow diffusion of new technologies, and the ongoing investment in old technologies after the Second Industrial Revolution. The main lesson from our model for the Information Technology Revolution is that the nature of transition following a technological revolution depends on the historical context: transition and diffusion are slow only if agents have built up through learning a large amount of knowledge about old technologies before the transition begins.--Federal Reserve Bank of Minneapolis web site
Money and interest rates with endogeneously segmented markets by Fernando Alvarez( Book )
16 editions published in 1999 in English and held by 78 libraries worldwide
This paper analyses the effects of open market operations on interest rates in a model in which agents must pay a fixed cost to exchange assets and cash. Asset markets are endogenously segmented in that some agents choose to pay the fixed cost and some do not. When the fixed cost is zero, the model reduces to the standard one in which persistent money injections increase interest rates, flatten the yield curve, and lead to a downward-sloping yield curve on average. In contrast sufficiently segmented, then persistent money injections decrease nominal interest rates, steepen or even twist the yield curve, and lead to an upward-sloping yield curve on average
Reputation spillover across relationships : reviving reputation models of debt by Harold Linh Cole( Book )
16 editions published in 1996 in English and held by 78 libraries worldwide
The advantage of transparent instruments of monetary policy by Andrew Atkeson( Book )
19 editions published between 2001 and 2006 in English and held by 77 libraries worldwide
Monetary policy instruments differ in their tightness-how closely they are linked to inflation-and their transparency-how easily the public can monitor them. Tightness is always desirable in a monetary policy instrument. When is transparency desirable? We show it is desirable when a government cannot commit to follow a given monetary policy. We apply our argument to a classic question in international economics: Is the exchange rate or the money growth rate the better instrument of monetary policy? We show that if the two instruments are equally tight and a government cannot commit to a policy, then the greater transparency of the exchange rate gives it an advantage as a monetary policy instrument.--Federal Reserve Bank of Minneapolis web site
International business cycles with endogenous incomplete markets by Patrick J Kehoe( Book )
19 editions published in 2000 in English and held by 74 libraries worldwide
Backus, Kehoe and Kydland (1992), Baxter and Crucini (1995) and Stockman and Tesar (1995) find two major discrepancies between standard international business cycle models with complete markets and the data: In the models, cross-country correlations are much higher for consumption than for output, while in the data the opposite is true; and cross-country correlations of employment and investment are negative, while in the data they are positive. This paper introduces a friction into a standard model that helps resolve these anomalies. The friction is that international loans are imperfectly enforceable; any country can renege on its debts and suffer the consequences for future borrowing. To solve for equilibrium in this economy with endogenous incomplete markets, the methods of Marcet and Marimon (1999) are extended. Incorporating the friction helps resolve the anomalies more than does exogenously restricting the assets that can be traded
Competitive equilibria with limited enforcement by Patrick J Kehoe( Book )
19 editions published between 2002 and 2003 in English and held by 73 libraries worldwide
This study demonstrates how constrained efficient allocations can arise endogenously as equilibria in an economy with a limited ability to enforce contracts and with private agents behaving competitively, taking a set of taxes as given. The taxes in this economy limit risk-sharing and arise in an equilibrium of a dynamic game between governments of sovereign nations. The equilibrium allocations depend on governments choosing to tax both the repayment of international debt and the income from capital investment in their countries
Optimal fiscal policy in a business cycle model by V. V Chari( Book )
16 editions published in 1993 in English and held by 70 libraries worldwide
This paper develops the quantitative implications of optimal fiscal policy in a business cycle model. In a stationary equilibrium the ex ante tax rate on capital income is approximately zero. There is an equivalence class of ex post capital income tax rates and bond policies that support a given allocation. Within this class the optimal ex post capital tax rates can range from being close to i.i.d. to being close to a random walk. The tax rate on labor income fluctuates very little and inherits the persistence properties of the exogenous shocks and thus there is no presumption that optimal labor tax rates follow a random walk. The welfare gains from smoothing labor tax rates and making ex ante capital income tax rates zero are small and most of the welfare gains come from an initial period of high taxation on capital income
Industry evolution and transition : a neoclassical benchmark by Andrew Atkeson( Book )
9 editions published in 1997 in English and held by 68 libraries worldwide
Abstract: Recently, a large number of countries have undertaken major reforms that have led to a large increase in the number of new enterprises. After these reforms, however, it has taken a number of years before output and productivity have begun to grow. The thesis of this paper is that the process of starting new enterprises is turbulent and time-consuming and as a result, it takes time before the benefits of reform show up in increases in measured output and productivity. To establish a neoclassical benchmark for reforming economies, we ask what the path of transition looks like in a reforming economy for which the process governing the growth of new enterprises looks like it does in the U.S., a well-functioning market economy. We find that it takes 5-7 years until measured output and productivity begin to grow rapidly following reform. This finding suggests that, even if all other aspects of the economy are perfect, the transition following economy-wide reforms should take a substantial amount of time
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Associated Subjects
Business cycles Business cycles--Econometric models Business cycles--Mathematical models Capital movements--Mathematical models Commercial policy--Econometric models Credit Credit--Econometric models Debts, External Debts, External--Econometric models Debts, External--Mathematical models Default (Finance)--Mathematical models Developing countries Economic development--Econometric models Economic forecasting--Econometric models Economic history Equilibrium (Economics) Equilibrium (Economics)--Econometric models Fiscal policy--Econometric models Foreign exchange rates--Econometric models Foreign exchange rates--Mathematical models Free trade--Econometric models Human capital--Mathematical models Income distribution--Econometric models Industrial policy--Mathematical models Industrial productivity Industrial revolution Inflation (Finance)--Mathematical models Interest rates--Econometric models International economic integration--Econometric models International economic relations International finance International finance--Mathematical models International trade Investments, Foreign--Mathematical models Investments--Econometric models Liquidity (Economics)--Econometric models Loans, Foreign--Econometric models Market segmentation--Econometric models Monetary policy--Econometric models Monetary policy--Mathematical models Money market--Econometric models Money supply--Econometric models New business enterprises--Mathematical models North America North American Free Trade Agreement (1992 December 17) Prices--Econometric models Prices--Mathematical models Taxation--Econometric models Technological innovations--Mathematical models United States
Alternative Names
Kehoe, P. J.
Kehoe, Patrick
English (403)
Dutch (1)
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