NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Christopher Phelan

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Working Papers and Chapters

January 2015Pareto Efficiency and Identity
with Aldo Rustichini: w20883
Inherent in the definition of Pareto efficiency is the idea that, in dynamic environments, an individual is indexed by the history of events up to his birth (rather than, as usual, the date of birth). Here, we explore the implications of this natural formulation. The set of Pareto efficient allocations that is consistent with this view is potentially larger than those considered so far in the literature. We show that the set of allocations is strictly larger because we do not require individuals to have insurance motives of the Harsanyi-Rawls type regarding risks on their own type realization. We do, however, maintain the insurance motives of parents toward their children. Even in our more general framework, efficiency criteria impose substantial restrictions on the set of allocations. Int...
March 2013Speculative Runs on Interest Rate Pegs
with Marco Bassetto: w18864
We analyze a new class of equilibria that emerges when a central bank conducts monetary policy by setting an interest rate (as an arbitrary function of its available information) and letting the private sector set the quantity traded. These equilibria involve a run on the central bank's interest target, whereby money grows fast, private agents borrow as much as possible against the central bank, and the shadow interest rate is different from the policy target. We argue that these equilibria represent a particular danger when banks hold large excess reserves, such as is the case following periods of quantitative easing. Our analysis suggests that successfully managing the exit strategy requires additional tools beyond setting interest-rate targets and paying interest on reserves; in particu...
April 1994Reconsidering the Costs of Business Cycles with Incomplete Markets
with Andrew Atkeson: w4719
In this paper, we measure the potential welfare gains from counter-cyclical policy in an economy with incomplete markets. In the course of conducting this measurement, we focus on two questions as central to the determination of those potential gains: (1) what is the likely effect of counter-cyclical policy on the nature of the income risk faced by individuals in the economy, and (2) what are the likely general equilibrium effects brought about as asset prices change due to the implementation of counter-cyclical policies? In taking up the first question, we see it as critical to distinguish whether the main effect of counter-cyclical policy is to directly reduce the income risk faced by each individual or is simply to reduce the correlation across individuals in the income risk that they...

Published: Reconsidering the Costs of Business Cycles with Incomplete Markets, Andrew Atkeson, Christopher Phelan. in NBER Macroeconomics Annual 1994, Volume 9, Fischer and Rotemberg. 1994

January 1994Reconsidering the Costs of Business Cycles with Incomplete Markets
with Andrew Atkeson
in NBER Macroeconomics Annual 1994, Volume 9, Stanley Fischer and Julio J. Rotemberg, eds.

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers onlyInformation about this author at RePEc

 
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