David E. Altig

Firm-Specific Capital, Nominal Rigidities and the Business Cycle

Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and pre-determined within a period.

Marginal Tax Rates and Income Inequality in a Life-Cycle Model

In this paper, we perform computational counterfactual experiments to examine the quantitative impact of marginal tax rates on the distribution of income. Our methodology builds on previous simulation models developed by Auerbach and Kotlikoff and Fullerton and Rogers, and uses an algorithm that allows us to examine marginal tax rate structures in their literal form. We find that distortions associated with particular marginal tax rate structures have sizable effects on income inequality in a reasonably quantified life-cycle setting: In our baseline experiments, the change in steady-state income inequality under 1989 U.S. income tax rates vis-a-vis 1984 rates is about half as large as the change actually seen in the data over those two years, when measured in terms of a monetary metric derived from Gini coefficients.

Inflation, Personal Taxes, and Real Output: A Dynamic Analysis

An examination, using the overlapping-generations approach, of how the interactions between inflation and the nominal taxation of capital income affect the cyclical behavior of the U.S. economy.

Monetary Policy Orientation in Times of Low Inflation

The views expressed in this paper do not necessarily represent the views of the institutions the authors are affiliated with.

Introduction: Recent Developments in Monetary Macroeconomics

The contents of this volume hardly require explanation beyond its title: “Recent Developments in Monetary Macroeconomics.” Our intent for the conference was to collect a set of papers reflecting the cutting edge of applied monetary macroeconomics. As befitting such an ambitious-sounding goal, the contributions are wide ranging. For purposes of this brief introduction, however, we might organize the papers as answers to three questions. (1) What is the “optimal” Taylor rule? (2) Are “New Keynesian” or “New Neoclassical Synthesis” models the final word on the monetary transmission mechanism? (3) Is there a role for money in the conduct of monetary policy?

Comment on "Taking Intermediation Seriously"

In April 2003, the University of Texas, Austin, the Federal Reserve Bank of Minneapolis, and the Federal Reserve Bank of Cleveland co-sponsored a conference in Austin, Texas, in honor of the contributions and in the memory of Bruce Smith. The program, which included eight presentations over two days, was remarkable in that it consisted almost entirely of papers representing work in which Bruce was engaged at the time of his death. “Taking Intermediation Seriously,” was one of those papers. Originally, Steve Williamson was slated to serve as one of the discussants for the paper at the November 2002 conference represented by this volume. Graciously, Steve agreed to step in and present the paper in Cleveland, as he was to later do in Austin. Although David Andolfatto would be the only discussant at the Cleveland meeting, I had the honor of serving in the discussant’s role at the Texas meeting. I have chosen to exercise my prerogative as editor of this volume, and include my Austin remarks herein. I do so in the hope of highlighting, one more time, the truly remarkable contributions of Bruce’s work. To a large extent, this is entirely unnecessary. Those contributions can be easily appreciated by perusing the list of his publications provided in the March 2002 edition of the Minneapolis Fed’s Quarterly Review, by noting the astounding number of coauthors with whom he collaborated, or simply inquiring as to his influence on those of us lucky enough to have come into his orbit. But here I wish to emphasize an element of Bruce’s efforts that would be too easy to overlook: his abiding interest in the application of economic theory and history to the practice of policymaking. “Taking Intermediation Seriously,” which collects and organizes the issues that had absorbed much of Bruce’s interest and energy over the last part of his career, makes the point. In this paper, Bruce points to the future directions that he firmly believed held the most promise for progress in monetary and macroeconomic