stylized facts and stylized illusions inflation and productivity revisited recent estimates of a negative empirical relationship between inflation and the rate of growth of productivity provide a strong case for vigorous anti inflationary policy this paper tests the robustness of this evidence using long quarterly and annual datasets for four countries canada united states united kingdom west germany our results from cointegration and other time series tests show no evidence for any connection between inflation and the level of productivity we do find a strong connection between inflation and productivity growth but it is so internally inconsistent as to be incredible the best explanation is that it is accounted for entirely by statistical bias from attempting to cointegrate stationary and non stationary variables

is there an inflation productivity trade off some evidence from the manufacturing sector in greece this paper examines the effect of inflation on total factor productivity growth tfp using time series data for every two digit greek manufacturing industries in order to do the above a translog flexible cost function is estimated and used to decompose tfp growth into scale economies inflation and technical change the advantage of estimating a very general and flexible cost function is that it allows us for the first time to examine empirically a large number of significant relationships between tfp growth and economies of scale inflation and technical change the main conclusion drawn from this analysis is that inflation reduces tfp growth in a way which is sizeable furthermore using standard causality test the direction of causality between inflation and tfp growth was tested at the manufacturing level

adverse selection in the overlapping generations model the case of pure exchange abstract we examine the general equilibrium consequences of credit rationing that results from an adverse selection problem relative to a full information benchmark economy static incentive problems result in reductions in the rate of return at inside money equilibria and hence can cause dynamic inefficiency these problems also create a role for outside money and may convert otherwise classical into samuelsonian economies however even the presence of money does not support steady state equilibria with constrained optimality properties policies that do support constrained optima are outlined as are the consequences of credit rationing for the financing of government deficits journal of economic literature classification numbers e13 e40 e44 e50 g14

optimism pessimism and financial bubbles this paper shows that it is possible to extend the scope of the existence of rational bubbles when uncertainty is introduced associated with rank dependent expected utility this rdu assumption can be viewed as a transformation of probabilities depending on the pessimism optimism of the agent the results show that pessimism favors the existence of deterministic bubbles when optimism may promote the existence of stochastic bubbles moreover under pessimism the rdu assumption may generate multiple bubbly equilibria the rdu assumption also leads to new conditions ensuring the absence of pareto optimality of the competitive equilibrium without bubbles these conditions still govern the existence of bubbles

money and credit in liquidity provision abstract this paper studies the liquidity provision in a model where the roles of money are challenged by other financial instruments alternative to money credit can be used as means of payment and rate dominating assets are available to serve as stores of value two features are found to be crucial in rendering money valuable in this environment information asymmetry in credit trading relationship and uncertainty in individuals liquidity demand in general the model economy can display a payment mechanism of money only credit only or mixed use of money and credit in transactions depending on the severity of the information asymmetry the optimal quantity of money in our paper is shown to contrast those in other monetary models

switching bubbles from outside to inside bubbles abstract the united states has recently experienced two asset price bubbles the dot com and the housing bubbles these bubbles had very different effects on investment and debt of manufacturing firms in this paper i develop a framework to understand the differential effect of two types of rational bubbles i distinguish between i outside bubbles which i define as savers purchasing and selling costless assets not attached to inputs of production and ii inside bubbles which i define as savers buying an input of production e g land or houses only as a store of value the model is an olg economy with savers and entrepreneurs savers save to consume when they are old entrepreneurs can borrow to invest but they face a collateral constraint in this environment rational bubbles can emerge i show that the size of an inside bubble is larger i also find that when the economy switches from an outside to an inside bubble manufacturing or non housing investment and debt is lower consistent with the u s experience finally i show that even though steady state consumption is higher with an outside bubble a social planner would prefer an inside bubble when the productivity of entrepreneurs is low

endogenous growth and the emergence of equity finance abstract this paper characterises the development of equity markets as a dynamic process that both influences and is influenced by the development of the real sector of the economy in overlapping generations economy borrowers seek funds to run risky investment projects by drawing up contracts which may take the form of either equity or debt issue in the presence of information asymmetry between borrowers and lenders the optimal contract is determined by trading off information dilution costs against bankruptcy costs significantly the equilibrium choice of contract depends on the state of the economy which in turn depends on the contracting regime based on this analysis the paper provides a theory of the joint determination of real and financial development with the ability to explain the emergence of a stock market along the path of real development

new keynesian models durable goods and collateral constraints abstract econometric evidence suggests that in response to monetary policy shocks durable and non durable spending co move positively and durable spending exhibits a much larger sensitivity to the shocks a standard two sector new keynesian model with perfect financial markets is at odds with these facts the introduction of a borrowing constraint where durables play the role of collateral assets helps in reconciling the model with the empirical evidence

no bubble condition model free tests in housing markets we test for the existence of housing bubbles associated with a failure of the transversality condition that requires the present value of payments occurring infinitely far in the future to be zero the most prominent such bubble is the classic rational bubble we study housing markets in the united kingdom and singapore where residential property ownership takes the form of either leaseholds or freeholds leaseholds are finite maturity pre paid and tradeable ownership contracts with maturities often exceeding 700 years freeholds are infinite maturity ownership contracts the price difference between leaseholds with extremely long maturities and freeholds reflects the present value of a claim to the freehold after leasehold expiry and is thus a direct empirical measure of the transversality condition we estimate this price difference and find no evidence of failures of the transversality condition in housing markets in the u k and singapore even during periods when a sizable bubble was regularly thought to be present

tax evasion the underground economy and financial development abstract we study the relationship between the underground economy and financial development in a model of tax evasion and bank intermediation agents with heterogeneous skills seek loans in order to undertake risky investment projects asymmetric information between borrowers and lenders implies a menu of loan contracts that induce self selection in a separating equilibrium faced with these contracts agents choose how much of their income to declare by trading off their incentives to offer collateral against their disincentives to comply with tax obligations the key implication of the analysis is that the marginal net benefit of income disclosure increases with the level of financial development thus in accordance with empirical observation we establish the result that the lower is the stage of such development the higher is the incidence of tax evasion and the greater is the size of the underground economy

bubbles in prices of exhaustible resources this article proposes a test for the presence of a bubble in the price of an exhaustible resource a bubble is accompanied by a rise in the storage to consumption ratio consumption peters out and a fraction of the original stock is held forever the test suggests there is a bubble in the price of oil and in the market for high end bordeaux wines but other explanations are also possible a bubble reduces welfare regardless of whether there are other stores of value particularly fiat money

speculative growth hints from the u s economy we propose a framework for understanding episodes of vigorous economic expansion and extreme asset valuations we interpret this phenomenon as a high valuation equilibrium with a low cost of capital based on optimism about future funding the key ingredient for such equilibrium is feedback from increased growth to a decline in the long run cost of capital this feedback arises when an expansion comes with technological progress in the capital sector when fiscal rules generate procyclical fiscal surpluses when the rest of the world has lower expansion potential or high saving needs and when financial constraints are relaxed by the expansion itself

public capital asymmetric information and economic growth we investigate the provision of public capital in an endogenous growth model with asymmetric information in a credit market with costly screening we show that the equilibrium contracts are characterized by the self selection of borrowers through identifying an additional adverse effect of taxation on growth we show that the optimal tax rate in our model is smaller than the output elasticity of public capital therefore our analysis justifies a more conservative tax policy in the presence of asymmetric information furthermore our model suggests a number of implications that appear to be well supported by preliminary evidence in cross country data jel classification d82 h21 041

money growth dynamic efficiency and asset bubbles in a perpetual youth model we consider a perpetual youth model in which real balances are an argument of the utility function we show that dynamic efficiency is compatible with a positive inflation rate and that the higher inflation the larger is the size of the bubble required to remove the inefficiency

the international transmission of credit bubbles theory and policy we live in a new world economy characterized by nancial globalization and historically low interest rates this environment is conducive to countries experiencing credit bubbles that have large macroeconomic eects at home and are quickly propagated abroad in previous work we built on the theory of rational bubbles to develop a framework to think about the origins and domestic eects of these credit bubbles this paper extends that framework to include many countries and general preferences and uses it to study how nancial integration aects the properties of credit bubbles how the latter are transmitted across countries and the role of international policy coordination

asymmetric information and demand for money in an overlapping generations economy this paper studies a pure exchange overlapping generations economy in which agents have asymmetric information pertaining to their income realizations such an information asymmetry introduces a role for fiat money that would otherwise be absent this information asymmetry can also drastically alter the equilibrium properties of the analogous model with perfect information in general the more severe the information asymmetry the greater the demand for fiat money

bubbles and self enforcing debt we characterize equilibria with endogenous debt constraints for a general equilibrium economy with limited commitment in which the only consequence of default is losing the ability to borrow in future periods first we show that equilibrium debt limits must satisfy a simple condition that allows agents to exactly roll over existing debt period by period second we provide an equivalence result whereby the resulting set of equilibrium allocations with self enforcing private debt is equivalent to the allocations that are sustained with unbacked public debt or rational bubbles in contrast to the classic result by bulow and rogoff 1989a positive levels of debt are sustainable in our environment because the interest rate is sufficiently low to provide repayment incentives

a characterization of ramsey equilibrium abstract consider a perfect foresight equilibrium model with a single capital good a borrowing constraint and many infinitely lived households with fixed but different discount factors the steady state capital stock is held by the most patient household quart j econ 95 1980 375 382 econ j 38 1928 543 559 an example shows the total capital can exhibit an equilibrium cycle in contrast to the stability property of the one household case in the example only the most patient household saves and his income deceases in capital we give a condition implying income is increasing in capital and use it to show any equilibrium converges to the steady state

the relationship between relative prices and the general price level it is very nearly a truismi amaong neoclassical economists that the public is wont to confuse changes in the general price level with relative price changes correspondingl y one might speak of the independence between the two as one of the central postulates of the neoclassical tradition william stanley jevons was aml ong the first to identify this basic dichotomin economic life as well as to attempt to explain the ordinary citizen s seenming incapacity to understand it

job queues and the union status of workers this paper develops a model of the determination of the union status of workers that allows for the possibility of queuing for union jobs the empirical results derived using a sample from the university of michigan panel study of income dynamics are supportive of the queuing hypothesis the no queue model can be rejected using a likelihood ratio test this suggests that a simple probit or logit model for union status is misspecified because it is not based on any consistent behavioral theory an important implication of the model is that because most new entrants to the labor market prefer union jobs but cannot get them and because accrual of nonunion seniority makes workers progressively less likely to desire union jobs the union status of workers is largely determined by their success in being selected from the queue early in their working life

asset pledgeability and endogenously leveraged bubbles abstract we develop a simple model of defaultable debt and rational bubbles in the price of an asset which can be pledged as collateral in a competitive credit pool when the asset pledgeability is low the down payment is high and bubble investment is unleveraged as in a standard rational bubble model when the pledgeability is high the down payment is low making it easier for leveraged borrowers to invest in the bubbly asset as loans are packaged together into a competitive pool the pricing of individual default risk may facilitate risk taking in equilibrium credit constrained borrowers may optimally choose a risky leveraged investment strategy borrow to invest in the bubbly asset and default if the bubble bursts the model predicts joint boom bust cycles in asset prices and securitized credit

optimal monetary policy with durable consumption goods abstract we document that the durable goods sector is much more interest sensitive than the nondurables sector and then investigate the implications of these sectoral differences for monetary policy we formulate a two sector general equilibrium model that is calibrated both to match the sectoral responses to a monetary shock derived from our empirical var and to imply an empirically realistic degree of sectoral output volatility and comovement while the social welfare function involves sector specific output gaps and inflation rates the performance of the optimal policy rule can be closely approximated by a simple rule that targets a weighted average of aggregate wage and price inflation in contrast a rule that stabilizes a more narrow measure of final goods price inflation performs poorly in terms of social welfare

bubbles and capital flow volatility causes and risk management emerging market economies are fertile ground for the development of real estate and other financial bubbles despite these economies significant growth potential their corporate and government sectors do not generate the financial instruments to provide residents with adequate stores of value capital often flows out of these economies seeking these stores of value in the developed world bubbles are beneficial because they provide domestic stores of value and thereby reduce capital outflows while increasing investment but they come at a cost as they expose the country to bubble crashes and capital flow reversals we show that domestic financial underdevelopment not only facilitates the emergence of bubbles but also leads agents to undervalue the aggregate risk embodied in financial bubbles in this context even rational bubbles can be welfare reducing we study a set of aggregate risk management policies to alleviate the bubble risk we show that prudential banking regulation sterilization of capital inflows and structural policies aimed at developing public debt markets and property rights all have a high payoff in this environment

globalization and financial development a model of the dot com and the housing bubbles abstract in the last decade the united states experienced the burst of the dot com and the housing bubbles i develop a model to study the relationship between globalization and the emergence of rational bubbles i also analyze how the effect of globalization on house prices depends on the type of bubble i show that bubbles cannot arise in a financially developed country in autarky in contrast as globalization progresses bubbles are more likely to appear in the financially developed country i also show that house prices increase with globalization only when the bubble is attached to houses this prediction is consistent with empirical evidence for u s metropolitan areas

the effect of inflation on the natural rate of output experimental evidence we examine the inflation output relationship in the usa for the period 1955 90 we start by replicating smyth 1992 and subjecting his estimates to a series of diagnostic tests the model is shown to satisfy conditions for valid inference weak exogeneity and policy analysis super exogeneity engle hendry and richard 1983 these robustness checks allow us to study the out of sample consequences of the point estimates for various levels of inflation one central experimental result is that for inflation rates exceeding 4 the natural rate of output is reduced to such an extent that it contributes to a reduction in the growth rate of real gnp that is below historical trend 3 1 in our sample

capital flows consumption booms and asset bubbles a behavioural alternative to the savings glut hypothesis bernanke 2005 hypothesized that a global savings glut was causing large trade imbalances however we show that the global savings rates did not show a robust upward trend during the relevant period moreover if there had been a global savings glut there should have been a large investment boom in the countries that imported capital instead those countries experienced consumption booms national asset bubbles explain the international imbalances the bubbles raised consumption resulting in large trade deficits in a sample of 18 oecd countries plus china movements in home prices alone explain half of the variation in trade deficits

price level uncertainty indexation and employment uncertainty about future price level is one of the most common features of today s economies yet research on the relationship between unemployment and price changes focused on the level of those changes in his recent nobel lecture on inflation and unemployment milton friedman suggested that an increased variability of actual or anticipated inflation may raise the natural level of unemployment 6 466 observing the tendency of inflation that is high on the average to be highly variable friedman suggested the relationship between unemployment and inflation uncertainty as a possibly explanation for the recently observed positive slope of the philips curve as possible remedies to the detrimental effect of inflation uncertainty friedman suggested a stabilization of the inflation rate through e g a stable monetary expansion and the institution of price indexing the purpose of this paper is to point at a possible relationship between price level uncertainty and the real sector of the economy it is shown that under plausible assumptions about individuals preferences and attitude toward risk an increase in price level uncertainty may bring about a decrease in the level of employment and possibly an increase in unemployment as suggested by friedman these results are also supported by empirical evidence

real wage growth technical change and competition in the labor market the paper measures the rate of growth of average labor cost and the real wage for the twenty u s two digit manufacturing industries 1948 76 it is argued that these rates of growth give interesting information which other studies on the real wage ignore the results suggest that the gains from technical advance are shared equally across all labor markets consistent with the competitive paradigm a simple and appealing rationale for the observation that high growth industries show the slowest relative rate of growth of prices is also given t he general theory keynes 1936 unleashed many controversies one of the earliest and still topical controversy is the cyclical behavior of the real wage essentially the real wage employment debate has focussed on whether or not the demand schedule slopes downwards and there have been many studies on this topic producing a variety of conflicting findings a common feature of the real wage employment studies is to abstract away from the growth in the real wage that is bound to occur in a growing economy these studies are primarily concerned with deviations from trend or innovations in the real wage and the theme of this paper is that to ignore the growth in the real wage is to throw away valuable and interesting information this information on real wage growth tells us a great deal about competition in the labor market this study should be seen as being complementary rather than conflicting with the real wage employment studies the existence of a downward sloping demand curve for labor is after all not sufficient and probably not necessary for the functioning of competitive labor markets over the span of years 1948 76 i find that individual u s manufacturing industries record widely varying rates of productivity growth however these same industries tend to show a common rate of growth of the real wage this feature of productivity growth was emphasized by the late salter 1960 in his pathbreaking analysis of technical change he writes there is no tendency for above average increases in labour productivity to be accompanied by above average increases in earnings

asset bubbles in an overlapping generations model with endogenous labor supply this paper examines the effects of asset bubbles in an overlapping generations model with endogenous labor supply we show analytically that asset bubbles can lead to an expansion in steady state capital investment employment and output under certain conditions

economic growth with bubbles this paper presents a stylized model of economic growth with bubbles this model views asset price bubbles as a market generated device to moderate the effects of frictions in financial markets improving the allocation of investments and raising the capital stock and welfare the model illustrates various channels through which asset price bubbles affect the incentives for innovation and economic reforms and therefore the rate of economic growth the model also offers a new perspective on the effects of financial development on asset price bubbles and economic growth

a global model of oecd aggregate supply and demand using vector autoregressive techniques this paper presents a vector autoregressive model of the aggregate oecd economy using a theoretical model of global aggregate supply and demand relationships between industrial production cpi money supply and energy prices are examined using f tests variance decompositions and impulse response functions the empirical results are consistent with theory energy prices influence output and the price level in the short run while money influences the price level in the long run despite data problems this approach appears to be a reasonable compromise between simple arima models and the very detailed link type models

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

rational asset pricing bubbles this paper provides a fairly systematic study of general economic conditions under which rational asset pricing bubbles may arise in an intertemporal competitive equilibrium framework our main results are concerned with nonexistence of asset pricing bubbles in those economies these results imply that the conditions under which bubbles are possible including some well known examples of monetary equilibria are relatively fragile this paper is concerned with the conditions under which asset prices in an intertemporal competitive equilibrium are equal to the present value of the streams of future dividends to which each asset represents a claim according to a central result of the theory of finance this is very generally true in the case of economies with trading at only a finite sequence of dates as long as there are no restrictions upon transactions other than that associated with possible incom pleteness of the set of securities that are traded the result is sometimes called the fundamental theorem of asset pricing here we consider the extent to which such a result continues to be valid in the case of trading over an infinite horizon it has often been observed in the econometric literature on asset pricing bubbles that it is possible in principle for the price of a perpetuity and the dividends on that security to satisfy at all times a present value relation for one period holding returns while the security s price nonetheless does not equal the present value of the stream of dividends expected over the infinite future in such a case the price of the perpetuity is said to involve a bubble component 2 joint stochastic processes for which this component is nonzero are sometimes argued to characterize existing assets for a recent example see froot and obstfeld 1991 but such an inference depends upon aspects of the stochastic

bubbles and capital flows abstract this paper presents a stylized model of international trade and asset price bubbles its central insight is that bubbles tend to appear and expand in countries where productivity is low relative to the rest of the world these bubbles absorb local savings eliminating inefficient investments and liberating resources that are in part used to invest in high productivity countries through this channel bubbles act as a substitute for international capital flows improving the international allocation of investment and reducing rate of return differentials across countries this view of asset price bubbles could eventually provide a simple account of some real world phenomena that have been difficult to model before such as the recurrence and depth of financial crises or their puzzling tendency to propagate across countries

does productivity growth lower inflation in korea we investigate granger causality between productivity growth and inflation in korea using quarterly data for the period 1985q1 2002q4 our results indicate unidirectional granger causality from productivity growth to inflation in light of such causality we estimate the effect of productivity and other variables on productivity according to our regression results a 1 increase in labour and total factor productivity tfp reduces consumer price index cpi inflation by 0 07 0 08 and 0 37 0 44 respectively our results also suggest that the productivity inflation nexus became stronger in korea since the asian financial crisis and that this was largely due to structural reform and technological progress

real wages inflation and labour productivity in australia this paper presents an analysis of real wages inflation and labour productivity interrelationships using cointegration granger causality and most importantly structural change tests applications of tests to australian data over the 1965 2007 period corroborate the presence of a structural break in 1985 and show that a 1 percent increase in manufacturing sector real wages led to an increase in manufacturing sector productivity of between 0 5 and 0 8 percent comparable estimates for the effect of inflation on manufacturing sector productivity have limited statistical significance granger causality test results suggest that real wages and inflation both granger cause productivity in the long run

rational bubbles and public debt policy a quantitative analysis abstract do empirically plausible dynastic general equilibrium models admit bubbles and ponzi schemes under rational expectations contrary to conventional wisdom the answer is affirmative the central assumption is that current securities do not represent claims to all future profits calibrating the model to u s data we find that it is consistent with the presence of rational bubbles the observed level of public debt is entirely a ponzi scheme there are large welfare gains from eliminating bubbles on private assets and lodging all the non fundamental asset value in public debt paying off public debt benefits only a small group of wealthy individuals

intangible capital relative asset shortages and bubbles abstract purely technological factors can be a fundamental force behind the emergence of asset price bubbles in developed economies we analyze an economy in which the production technology utilizes both physical and intangible capital where the latter cannot be used as collateral for borrowing technological change in the form of increased importance of intangible capital in production sharpens the borrowing constraints of entrepreneurs leading to a scarcity of high yield assets relative to low yield ones this can create the conditions for asset bubbles additionally due to the financial frictions standard dynamic efficiency tests are not valid and bubbles are not pareto improving

the effect of inflation and real wages on productivity new evidence from a panel of g7 countries this article examines the effect of inflation and real wages on productivity within a panel unit root and panel cointegration framework for the g7 countries over the period 1960 to 2004 the main contribution of the article is to provide panel long run estimates of the effect of inflation and real wages on productivity in the g7 countries over this period the article finds that for the panel as a whole a 1 increase in real wages generates a 0 6 increase in productivity while the effects of inflation on productivity are statistically insignificant for most of the individual countries and for the panel as a whole

labor market discrimination against hispanic and black men h ispanic american men have lower average wage rates than white non hispanics in 1975 the average white non hispanic male wage earner in the united states earned 5 97 an hour mexican men earned 4 31 72 as much as white non hispanics puerto rican men earned 4 52 76 as much and cuban men earned 5 33 89 as much as white non hispanics by way of comparison black men s average wages in 1975 were 4 65 78 of the white male wage several possible reasons for the hispanics lower wages come to mind among them are age and education geographic location immigration language difficulties and discrimination for example as shown in table 1 mexicans and puerto ricans are younger on average than the white non hispanic population and earnings tend to rise with age hispanics have lower average levels of education than white non hispanics and wages are positively associated with education many mexican americans live in the southwest where prices are relatively low moreover hispanics are more likely to be recent immigrants and to lack fluency in english than white non hispanics and so to be at a disadvantage in the labor market in addition there is a widespread belief that hispanics suffer from employment discrimination and cannot obtain the wages that their human capital would command if they were non hispanic whites how much of the wage differentials described above are due to each of these factors and to other inter group differences in wage related characteristics in particular how much impact does labor market discrimination have on the average hispanic man s wage and how does this compare with discrimination against blacks this paper provides answers to these questions a few other efforts have been made to analyze the relative earnings of hispanic and white nonhispanic men using 1960 and 1970 census data fogel 1966 poston and alvirez 1973 poston alvirez and tienda 1976 long 1977 and gwartney and long 1978 we use more recent data from the 1976 survey of income and education this data set enables us to measure wage rates more accurately and to specify the wage function more completely than does the census unlike previous analysts in estimating the wage function we take account of possible selectivity bias due to the distinction between average wage offers and average observed wages thus we hope to obtain a more accurate and up to date measure of labor market discrimination against hispanic men section ii explains the method used to separate the minority white non hispanic wage differential into the portions due to differences in average characteristics and the portion due to differences in unobserved factors and discrimination taking into account the possibility of selectivity bias in the observed wage sample section iii describes the data used in the study and the specification of the wage equation the breakdown of the observed wage differentials into components due to differences in participation in the wage and salary sector local price levels average characteristics and discrimination are presented in section iv section v summarizes our findings and discusses their implications for efforts to improve the economic situation of hispanics in the united states

the effect of unions on the employment of blacks hispanics and women to investigate whether unions have helped or hindered the employment prospects of minorities and women the author analyzes data on 1 273 california manufacturing plants for the period 1974 80 the

the role of social security in an economy with asymmetric information and financial intermediaries abstract we study an overlapping generations model with production asymmetric information and competitive financial intermediaries social security may be beneficial even when it should not be used under full information unless credit rationing emerges with pooling contracts in this case social security could be welfare reducing even when the safe rate of return falls short of population growth we provide a full characterization of constrained pareto efficient allocations and prove that when the expected marginal product exceeds population growth and high risk firms have a low probability of default no tax transfer policy can support these allocations as competitive equilibria when equilibria are constrained inefficient optimal contracts are pooling and the optimal stock market value is zero

educational policy in a credit constrained economy with skill heterogeneity an overlapping generations model where agents choose whether to become educated when young is presented education enhances productivity but needs to be financed by borrowing because of the possibility of default lenders may ration credit we characterize the steady state equilibrium with and without credit constraints and show that credit constraints are associated with lower education and a lower real interest rate we then study the role of public policy in remedying the inefficiency which occurs with credit market imperfections and examine whether public education can improve on the constrained equilibrium

monetary policy and the global housing bubble what caused the housing boom of the 2000s a number of researchers have suggested that loose monetary policy during the first half of the 2000s was a primary cause of the substantial run up in house prices in many countries however using a common statistical approach we find that monetary policy was not the main factor that should not be surprising although low interest rates raise house prices the increase in prices during the mid 2000s was much larger than the historical relationship between the two variables would suggest instead we investigate further the link between the marked loosening in terms and standards for mortgage credit and the most rapid increases in house prices this link provides some evidence for a story where credit provision and the demand for housing fed on each other and helped spur the housing boom our work suggests a greater role for macroprudential regulation rather than monetary policy in managing asset price booms jane dokko brian m doyle michael t kiley jinill kim shane sherlund jae sim and skander van den heuvel

the productivity inflation nexus the case of the australian mining sector this paper examines the causal links between productivity growth and two price series given by domestic inflation and the price of mineral products in australia s mining sector for the period 1968 1969 to 1997 1998 the study also uses a stochastic translog cost frontier to generate improved estimates of total factor productivity tfp growth the results indicate negative unidirectional causality running from both price series to mining productivity growth regression analysis further shows that domestic inflation has a small but adverse effect on mining productivity growth thus providing some empirical support for australia s inflation first monetary policy at least with respect to the mining sector inflation in mineral price on the other hand has a greater negative effect on mining productivity growth via mineral export growth

asset bubbles endogenous growth and financial frictions this paper analyzes the effects of bubbles in an infinitely lived agent model of endogenous growth with financial frictions and heterogeneous agents we provide a complete characterization on the relationship between financial frictions and the existence of bubbles our model predicts that if the degree of pledgeability is sufficiently high or sufficiently low bubbles can not exist they can only arise at an intermediate degree this suggests that improving the financial market condition might enhance the possibility of bubbles we also examine whether bubbles are growth enhancing or growth impairing in the long run we show that when the degree of pledgeability is relatively low bubbles boost long run growth on the other hand when it is relatively high bubbles lower long run growth moreover we examine the effects of the burst of bubbles and show that the effects much depend on the degree of the pldgeability i e the quality of financial system

shakeouts and market crashes this article provides a microfoundation for the rise in optimism that seems to precede market crashes small young markets are more likely to experience stock price run ups and crashes we use a zeira rob type of model in which demand size is uncertain optimism then grows rationally if traders prior distribution over market size has a decreasing hazard such prior beliefs are appropriate if most new markets are duds and only a few reach a large size the crash occurs when capacity outstrips demand as an illustration for the period 1971 2001 we fit the model to the telecom sector

asset bubbles labour market frictions and r d based growth employing an overlapping generations model of research and development r d based growth with labor market frictions this paper examines how employment changes induced by labor market frictions influence asset bubbles and long run economic growth asset bubbles can cannot exist when the employment rate is high low which leads to higher lower economic growth through labor market efficiency we also explore the steady state and transitional dynamics of bubbles economic growth and employment furthermore we show that policy or parameter changes that have a negative influence on the labor market can lead to a bubble burst

habit persistence in overlapping generations economies under pure exchange abstract this paper analyzes the implications of habit persistence preferences for savings and equilibrium dynamics in the context of an overlapping generations model under pure exchange we show that habit persistence can convert an economy which otherwise has no role for government currency into an economy where there does exist a role for such currency further the increased saving induced by habit persistence implies that governments are able to float higher levels of deficits in such economies relative to economies without habit persistence the paper also shows that relative to standard preferences habit persistence preferences cause the savings function to become decreasing in the rate of interest at lower values for relative risk aversion this is of particular interest since the paper demonstrates that this result is closely related to the relative success of models with habit persistence in explaining the equity premium puzzle journal of economic literatureclassification numbers e21 e32

inflation and the growth rate in the united states natural output the continuing and rising rate of inflation in the united states is of concern because inflation is not harmless inflation causes economic agents to waste time and resources reducing the growth rate of productivity and the natural level of output the size of this effect is estimated using in which an inflation variable natural growth rate is embedded in an expectations augmented phillis curve or lucas surprise function the effect is large for each one percentage point decrease in the annual inflation rate the annual growth rate in productivity is reduced by 0 223 percentage points thus a reduction in inflatin from 6 to zero would increase the natural rate of output growth by one and one third percentage points per year given the unwillingness of politicians and perhaps the chairman of the federal reserve system to attempt aggressively to lower the rate of inflation there is considerable merit in an institutional reform that directs the federal reserve to reduce inflation to zero and maintain p

financial market globalization symmetry breaking and endogenous inequality of nations this paper investigates the effects of financial market globalization on the inequality of nations the world economy consists of inherently identical countries which differ only in their levels of capital stock each country is represented by the standard overlapping generations model modified only to incorporate credit market imperfection an integration of financial markets affects the set of stable steady states as it changes the balance between the equalizing force of the diminishing returns technology and the unequalizing force of the wealth dependent borrowing constraint the model is tractable enough to allow for a complete characterization of the stable steady states in the absence of the international financial market the world economy has a unique steady state which is symmetric and stable in the presence of the international financial market symmetry breaking occurs under some conditions that is the symmetric steady state loses its stability and stable asymmetric steady states come to exist in the stable asymmetric steady states the world economy is endogenously divided into the rich and poor countries the borrowing constraints are binding in the poor but not in the rich the world output is smaller the rich are richer and the poor are poorer in any of the stable asymmetric steady states than in the unstable symmetric steady state

the impact of industrial and occupational structure on black white employment allocation this research focuses on the factors associated with the differential distribution of black and white men across labor market positions hypotheses concerning the effects of industrial and occupational characteristics are derived using an eclectic approach which draws heavily on the labor market segmentation literature incorporated as it ell are ideas from neoclassical and institutional economics and from the occupational segregation and class approaches in sociology the results raise some intriguing puzzles in terms of the contrasting effects of occupational versus industrial unionization and the opposite signed effects of market power and size overall the results provide a mixed evaluation of both the neoclassical approach and the dual economy approach to the explanation of black white employment differences perhaps the most important result from this research is the demonstration of the existence and form of the systematic patterning of the allocation of blacks and whites to labor market positions net of the influence of their individual wtork related characteristics

intermediation and the equilibrium allocation of investment capital implications for economic development abstract we investigate several common assertions about intermediation and how it affects the allocation of investment capital we use a model with adverse selection and costly state verification in which both debt contracts and credit rationing are observed intermediaries arise due to a comparative advantage in information acquisition relative to the situation absent intermediation intermediaries reduce credit rationing and inefficient interest rate differentials the model also shows how large interest rate differentials can be observed when financial markets are not integrated and how the volume of intermediation is affected by changes in the environment

the decline of private sector unionism and the gender wage gap between 1973 and 1988 private sector unionism fell by 9 5 percentage points more for men than women and the gender wage gap one minus the ratio of female to male wages decreased by 09 these trends support two findings first unionism fell more slowly for women primarily because the probability of unionism fell most rapidly in jobs dominated by males second the greater decline in unionism among males is responsible for approximately one seventh of the 09 decline in the gender wage gap

growth enhancing bubbles this article challenges the conventional wisdom that speculation in financial markets reduces long run growth it shows that the real impact of a rational deterministic speculative bubble depends on the type of asset that is being speculated on speculative bubbles on equity raise the market value of firms thus encouraging entrepreneurship firm creation investment and growth on the other hand speculation on other types of assets is shown to be unambiguously growth impairing the model can explain some stylized facts about financial development and growth finally regulatory implications are discussed briefly