optimal nonuniform pricing with generalized consumer choice a frequent assumption in nonuniform pricing models is that local maximizing conditions are met exactly once for each purchasing consumer no consumer can be indifferent between two nonadjacent usage levels each consumer then responds to a change in marginal price only by incrementally reducing her usage more realistically maximizing conditions are sometimes twice met for some interior users who can be indifferent between nonadjacent usage levels and may therefore jump discretely if marginal prices change at either level the author derives a monopolist s generalized price schedule under these circumstances and shows that marginal price may fall below marginal cost copyright 1994 by blackwell publishing ltd

capital controls global liquidity traps and the international policy trilemma the zero bound on interest rates introduces a new dimension to the trilemma in international policy the openness of the international financial market might render monetary policy ineffective even within a system of fully flexible exchange rates because shocks that lead to a liquidity trap in one country are propagated through financial markets to other countries however the effectiveness of monetary policy can be restored by the imposition of capital controls we derive the optimal response of monetary policy to a global liquidity trap in the presence of capital controls we show that even though capital controls might facilitate effective monetary policy capital controls are not generally desirable in terms of welfare

looking for hysteresis in coal consumption in the us abstract this paper estimates an unobserved components model to explore coal consumption in the usa we ask whether coal consumption exhibits hysteresis defined as a dynamic structure in which the cyclical component of coal consumption has permanent effects on the natural component in contrast to previous analysis we provide evidence in favor of hysteresis in coal consumption by using the nonlinear framework proposed recently by perez alonso and di sanzo 13 in which threshold type nonlinearities are introduced by allowing past cyclical consumption to have a different impact on the natural component depending on the regime the article discusses implications of the findings for energy conservation policies

financial globalization financial crises and contagion abstract two observations suggest that financial globalization played an important role in the recent financial crisis first more than half of the rise in net borrowing of the u s non financial sectors since the mid 1980s has been financed by foreign lending second the collapse of the u s housing and mortgage backed securities markets had worldwide effects on financial institutions and asset markets using an open economy model where financial intermediaries play a central role we show that financial integration leads to a sharp rise in net credit in the most financially developed country and to large asset price spillovers of country specific shocks to bank capital the impacts of these shocks on asset prices are amplified by bank capital requirements based on mark to market

optimal monetary policy rules financial amplification and uncertain business cycles abstract this paper studies optimal monetary policy in the presence of uncertainty time variation in cross sectional dispersion of firms productive performance using a model with financial market imperfections the results suggest that i optimal policy is to dampen the strength of financial amplification by responding to uncertainty at the expense of creating mild degree of fluctuations in inflation ii higher uncertainty makes the welfare maximizing planner more willing to relax financial constraints iii credit spreads are a good proxy for uncertainty hence a non negligible response to credit spreads together with a strong anti inflationary policy stance achieves the highest aggregate welfare possible

financial intermediation real exchange rates and unconventional policies in an open economy we discuss unconventional policies in an open economy where financial intermediaries face occasionally binding collateral constraints the model highlights interactions among the real exchange rate interest rates and financial frictions the real exchange rate can affect international credit constraints via a net worth effect and a novel leverage ratio effect unconventional policies are non neutral if financial constraints bind credit programs are most effective when targeted towards financial intermediaries sterilized interventions matter because the increased availability of tradables associated with sterilization relaxes financial frictions

persistence in natural gas consumption in the us an unobserved component model abstract this article re examines the persistence in natural gas consumption using an alternative methodology in particular we report estimates of an unobserved components model in which hysteresis exists if cyclical and natural gas consumptions do not evolve independently in addition this framework is also extended by using the nonlinear approach in which nonlinearities are introduced by allowing past cyclical component to have a different impact on the natural component depending on the regime in a linear framework our results seem to indicate that hysteresis does not exist however when non linearity is taken into account we provide evidence in favor of hysteresis in natural gas consumption when the variations in natural gas consumption are above the threshold value we also selectively survey the empirical literature that examines the long term properties of energy series in order to put our contribution in perspective

breaking free of the triple coincidence in international finance the traditional approach to international finance is to view capital flows as the financial counterpart to savings and investment decisions assuming further that the gdp boundary defines both the decision making unit and the currency area this triple coincidence of gdp area decision making unit and currency area is an elegant simplification but misleads when financial flows are important in their own right first the neglect of gross flows when only net flows are considered can lead to misdiagnoses of financial vulnerability second inattention to the effects of international currencies may lead to erroneous conclusions on exchange rate adjustment third sectoral differences between corporate and official sector positions can distort welfare conclusions on the consequences of currency depreciation as macroeconomic risks may be underestimated this paper illustrates the pitfalls of the triple coincidence through a series of examples from the global financial system in recent years and examines alternative analytical frameworks based on balance sheets as the unit of analysis

international spillovers of large scale asset purchases this paper evaluates the international spillover eects of large scale asset purchases lsaps using a two country dynamic stochastic general equilibrium model with nominal and real rigidities and portfolio balance eects portfolio balance eects arise from imperfect substitution between short and long term bond portfolios in each country as well as between domestic and foreign bonds within these portfolios we show that lsaps lower both domestic and foreign long term yields and stimulate economic activity in both countries international spillover eects

demand variability supply shocks and the output inflation tradeoff this paper examines the shift in the relation between the inflation rate and the rate of growth of real output which has occurred in the united states over the past three decades and attempts to assess the relative importance of three possible lines of explanation a the new classical view of the output inflation tradeoff initially specified by lucas b the effect of supply side shocks such as energy prices c the effect of inflation variability on the natural rate of real output as hypothesized by milton friedman the paper concludes that b and c seem to have played a significant role in the observed shift from a positive to a negative correlation between the rate of inflation and the rate of real output growth but that a did not this abstract was borrowed from another version of this item

the time varying nairu and its implications for economic policy the nairu the unemployment rate consistent with a constant rate of inflation is estimated in this paper as a parameter allowed to vary over time value is determined in an econometric model where the inflation rate depends on its past values demand and supply shocks the nairu estimated for the gdp deflator varies over the past forty years within 5 4 to 6 5 percent its estimated value for the most recent quarter 1996 q2 is 5 6 percent the nairu has declined in recent years in response to global competition immigration other factors weakening labor s bargaining position and the rapidly declining prices of computers and other electronics

estimating the natural rate of unemployment and testing the natural rate hypothesis how should one measure the natural rate of unemployment this paper proposes a systems procedure as an alternative to nairu the natural rate is treated as an unobserved state variable in a system that includes measurement equations for the unemployment rate the rate of wage growth and the rate of inflation the model is derived from a version of the wage bargaining model of blanchard and embodies a version of the natural rate hypothesis the model is estimated by embedding the kalman filter within the full information maximum likelihood procedure for us data the estimated model implies substantial post war variation in the natural rate and a negative but weak effect of inflation surprises on unemployment copyright 1999 john wiley sons ltd

new measures of the output gap based on the forward looking new keynesian phillips curve abstract forward looking versions of the new keynesian phillips curve imply that the output gap the deviation of the actual output from its natural level due to nominal rigidities drives the dynamics of inflation relative to expected inflation we exploit this to set up a bivariate unobserved component model for extracting new estimates of the output gap in the us the gap estimates are large and persistent even after allowing for correlated trend and cycle shock we then augment our model to use the information in the unemployment rate the estimates confirm the presence of a large and persistent cyclical component

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

measuring sovereign risk spillovers and assessing the role of transmission channels a spatial econometrics approach abstract we contribute to the literature on international risk spillovers by developing a unified framework based on spatial econometrics that enables us to address the following questions i what are the effective transmission channels real linkages and informational channels of international risk spillovers across countries and or regions ii what are the most dominant ones and iii which countries are most at risk for their environment and which are suffering the most from international exposure our analysis based on 41 advanced and emerging economies from 2008q1 to 2012q4 shows that among the considered channels for explaining international spillovers of sovereign bond spreads the informational channel is of utmost importance our results challenge previous findings from the literature in which the empirical strategy did not accommodate altogether important features of country spillovers such as the co existence of multiple transmission channels in the presence of contemporaneous and time lagged interactions ultimately our stress testing analysis reveals important insights on countries prone either to international spillovers international exposure or both at the regional and the worldwide level

global implications of self oriented national monetary rules author s obstfeld maurice rogoff kenneth abstract it is well known that if international linkages are relatively small the potential gains to international monetary policy coordination are typically quite limited but what if goods and financial markets are tightly linked is it then problematic if countries unilaterally design their institutions for monetary stabilization are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination we argue that under plausible assumptions the answer is no unless risk aversion is very high lack of coordination in rule setting is a second order problem compared to the overall gains from monetary policy stabilization

financial crises bank risk exposure and government financial policy a macroeconomic model with nancial intermediation is developed in which the intermediaries banks can issue outside equity as well as short term debt this makes bank risk exposure an endogenous choice the goal is to have a model that can not only capture a crisis when banks are highly vulnerable to risk but can also account for why banks adopt such a risky balance sheet in the rst place we use the model to assess quantitatively how perceptions of fundamental risk and of government credit

optimal nonuniform prices we consider optimal nonuniform pricing schedules where the price depends upon the amount purchased such schedules are regularly used by public utilities and other services welfare optimal nonuniform prices are related to the theory of optimal uniform prices developed by ramsey we characterize situations in which upward or downward discontinuities in pricing schedules are optimal our results are applicable to a number of related problems including optimal taxation insurance and incentives economic theory has confined most of its attention to markets with uniform prices in which the price per unit charged is invariant to the level of a customer s purchases this focus is warranted when goods are resellable since any attempt to charge nonuniform prices could be circumvented by reselling amongst customers but when goods are not resellable nonuniform prices are not only possible but common public utilities have declining block pricing with lower unit charges for large levels of consumption many agencies providing services including communications transportation even education use two part pricing with a fixed entry or retainer charge and a further charge per unit consumption nonuniform price schedules can be expected to be ever more common as services become a larger fraction of total output the increasing prevalence of nonuniform pricing policies have made them the focus of recent public and economic attention oi 1971 feldstein 1972 and ng and weisser 1974 have examined optimal two part pricing policies leland and meyer 1976 examine block pricing and show by example that optimal welfare policies may require nonuniform prices if zero profit constraints are binding in this paper we consider arbitrary nonuniform pricing policies using variational techniques two part and block pricing schedules are of course special cases of the environment we consider the work most closely related to our examination is the seminal paper by spence 1978 and subsequent analysis by roberts 1979 spence however does not pay explicit attention to the key role played by constraints on optimal pricing schedules roberts considers upward price discontinuities which lead to bunching of consumers at a given level of consumption but not downward price discontinuities which lead to regions in which no consumer chooses to consume gaps bunching or gaps may appear in the optimal price schedule even when underlying demand and cost functions are smooth and well behaved the prevalence of discontinuous pricing schedules e g the block pricing structures of public utilities argues that these questions are of practical as well as theoretical interest

financial intermediation resource allocation and macroeconomic interdependence abstract during the first decade of the euro southern countries experienced a boom bust cycle in bank lending non tradable sector growth and capital inflows i develop a quantitative open economy model of banking that is consistent with the banks behavior in credit allocation and foreign borrowing observed in spanish data i illustrate how movements in the frictions of cross border deposits generate an endogenous asymmetric allocation of bank credit toward non traded sectors while producing a persistent and climbing current account deficit a common central bank s unconventional policies in response to sudden stops are successful at ameliorating the downturn

international business cycles the authors estimate a dynamic two country model in which economic fluctuations are driven by a worldwide supply shock country specific supply shocks and relative fiscal money and preference shocks identification is achieved using only long run restrictions based on a theoretical model the main results are 1 supply shocks particularly country specific ones are very important in generating international business cycles and 2 although the post 1973 flexible exchange rate period has been inherently more volatile there are no differences in transmission properties of economic disturbances across exchange rate regimes for the endogenous variables they focus on copyright 1993 by american economic association

central banking in the credit turmoil an assessment of federal reserve practice abstract central banking is understood in terms of the fiscal features of monetary credit and interest on reserves policies monetary policy expanding reserves by buying treasuries transfers all revenue from money creation directly to the fiscal authorities credit policy selling treasuries to fund loans or acquire non treasury securities is debt financed fiscal policy interest on reserves frees monetary policy to fund credit policy independently of interest rate policy an ambiguous boundary of responsibilities between the fed and the fiscal authorities contributed to economic collapse in fall 2008 accord principles are proposed to clarify fed credit policy powers and secure its independence on monetary and interest rate policy the fed needs more surplus capital from the fiscal authorities to be fully flexible against both inflation and deflation at the zero interest bound

unconventional monetary and fiscal policies in interconnected economies do policy rules matter abstract this paper examines the effects of adopting unconventional policies in a crisis environment characterised by the international transmission of negative financial intermediation and real capital quality shocks using a two country model with financial frictions we compare adjustments in both countries we condition one country to adopt a credit easing rule as the monetary regime regardless of the source of the crisis we consider results when the other country does nothing or implements a fiscal tax rate policy rule our results show that when both countries experience massive asymmetric shocks the adoption of optimal policy rules can be used effectively to mitigate negative consequences for both economies however if the crisis events are due to similar shocks unconventional monetary policy or fiscal policy can improve conditions in own country whilst worsening economic conditions in the other country generating beggar thy neighbor growth outcomes

in search of the natural rate of unemployment abstract the natural rate of unemployment can be measured as the time varying steady state of a structural vector autoregression for post war us data the natural rate implied by this approach is more volatile than most previous estimates with its movements accounting for the bulk of the variation in the unemployment rate as well as substantial portions of the variation in aggregate output and inflation these movements in turn can be related to variables associated with labor market search theory including unemployment benefits labor productivity real wages and sectoral shifts in the labor market there is also a strong negative relationship between inflation and the corresponding measure of cyclical unemployment supporting the existence of a short run phillips curve

unconventional fiscal policy at the zero bound when the zero lower bound on nominal interest rates binds monetary policy cannot provide appropriate stimulus we show that in the standard new keynesian model tax policy can deliver such stimulus at no cost and in a time consistent manner there is no need to use inecient policies such as

finance and international business cycles abstract business cycles are more correlated among countries that have similar financial structures we first document this empirical regularity using oecd data and then build a two country dsge model with financial frictions that replicates it alternative monetary policy regimes and parameter values are explored output co movements increase when the countries involved are linked by a credible exchange rate peg and when they open up to trade they decrease when their financial openness increases the model also accounts for a number of stylized facts of international business cycles such as the positive international correlation of output investment and employment

deciding to enter a monetary union the role of trade and financial linkages abstract this paper evaluates the role of trade and financial linkages in the decision to enter a monetary union we estimate a two country dsge model for the u k economy and the euro area with financial intermediaries as in gertler and karadi 2011 we use the model to compute the welfare trade offs from joining the euro we compare the gains from trade that would occur after the adoption of the euro against the costs of relinquishing monetary policy both conventional and unconventional we also study the effects of the changes in the corporate risk premium observed during the recent crisis we find that in tranquil times when the risk premium volatility is low the net welfare gain of joining the monetary union is 2 4 percent of life time consumption during financial crises when there is a sharp increase in the volatility of the risk premium joining a monetary union would lead to a net welfare loss of 2 2 percent of life time consumption the welfare analysis underscores the importance of financial stability to sustain a monetary union over time

the unholy trinity of financial contagion over the last 20 years some financial events such as devaluations or defaults have triggered an immediate adverse chain reaction in other countries which we call fast and furious contagion yet on other occasions similar events have failed to trigger any immediate international reaction we argue that fast and furious contagion episodes are characterized by the unholy trinity i they follow a large surge in capital flows ii they come as a surprise and iii they involve a leveraged common creditor in contrast when similar events have elicited little international reaction they were widely anticipated and took place at a time when capital flows had already subsided

time to ditch the nairu the concept of a natural rate of unemployment or nonacceleratinginflation rate of unemployment nairu has ruled macroeconomics for about 25 years yet it is still controversial a wide range of views exists over how the nairu should be estimated a fact that in itself raises questions about the practical usefulness of the concept this essay presents a brief for no confidence in four parts first the theoretical case for the natural rate is not compelling second the empirical evidence for a vertical phillips curve and the associated hypothesis that lowering unemployment past the nairu leads to unacceptable acceleration of inflation is weak and has become much weaker in the past decade third viewed collectively attempts to estimate the location of the nairu have become a professional embarrassment disagreements remain on too many basic issues fourth adherence to the concept as a guide to policy has major costs and negligible benefits conversely the risks of dropping the natural rate hypothesis are minor while the benefits from a sustained pursuit of full employment could be substantial

optimal bypass and cream skimming this paper develops a normative model of regulatory policy toward bypass and cream skimming it analyzes the effects of bypass on second degree price discrimination on the rent of the regulated firm and on the welfare of low demand customers it shows that pricing under marginal cost may be optimal for the regulated firm excessive cream skimming occurs if access to the bypass technology is not regulated and the prohibition of bypass may increase or decrease the regulated firm s rent jel 026 613 the regulation of natural monopolies is often associated with policies toward competition including restrictions on entry this paper is concerned with a common form of competition which threatens the regulated firm on its most lucrative markets examples abound in the telecommunications industry the development of microwave radio and communication satellites in the 1960 s introduced the possibility that big telecommunication customers might bypass the major common carrier att and the 1978 natural gas policy act in the united states has created the possibility for industrial plants to bypass the local distribution utilities by building direct connections to the pipelines gas producers or intermediaries

theory ahead of language in the economics of unemployment this paper discusses from the perspective of modern theories of unemployment several unemployment concepts that have been used over the years it argues that many of these concepts are of limited value and are dominated by a few simple concepts that are basic in the analysis of stochastic general equilibrium models

international capital flows abstract the surge in international asset trade since the early 1990s has lead to renewed interest in models with international portfolio choice we develop the implications of portfolio choice for both gross and net international capital flows in the context of a simple two country dynamic stochastic general equilibrium dsge model we focus on the time variation in portfolio allocation following shocks and resulting capital flows endogenous time variation in expected returns and risk which are the key determinants of portfolio choice affect capital flows in often subtle ways the model is consistent with a broad range of empirical evidence an additional contribution of the paper is to overcome the technical difficulty of solving dsge models with portfolio choice by developing a broadly applicable solution method

optimal monetary and macroprudential policy in a currency union abstract the financial crisis proved strikingly that financial frictions play a crucial role for system risk and policymakers have overlooked financial stability the obvious candidate for addressing financial stability is macroprudential policy in this paper we study the optimal ramsey monetary and macroprudential policy mix in a currency union in the case of different kinds of aggregate and idiosyncratic shocks the monetary and macroprudential instruments are modeled as independent tools with a union wide macroprudential tool full stabilization on the aggregate level is possible but welfare losses due to fluctuations in relative variables prevail with country specific macroprudential tools full stabilization of shocks is always possible but as a rule not optimal evaluating the performance of different policy regimes shows that the additional welfare gains from having country specific macroprudential tools are small and vanish as the ability of the central bank to commit decreases

global implications of national unconventional policies abstract financial integration in the markets for banks assets and liabilities makes balance sheet constraints highly correlated across countries resulting in a high degree of financial and macroeconomic interdependence likewise under financial integration unconventional policies aimed at stabilizing domestic financial and credit conditions could entail large international spillovers therefore stabilization by one country will also benefit other countries reducing incentives to implement credit policies in a classic free riding problem especially when these policies entail domestic costs we show that this outcome can emerge in an open economy model featuring financial intermediaries that face endogenously determined balance sheet constraints

optimality and sustainability regulation and intermodal competition in telecommunications as regulators continue to open utility markets to entry new market contestants may specialize in providing service for the utility s largest customers consequently old utility pricing procedures may no longer be sustainable taking telecommunications regulation as an example this article develops optimal pricing strategies for utilities that have large customers who have other attractive service options i demonstrate that under an optimal nonuniform price schedule utilities can legitimately price high level usage below its associated marginal usage cost furthermore customers will make economically efficient choices when deciding whether to forego utility service

the great retrenchment international capital flows during the global financial crisis the current crisis saw an unprecedented collapse in international capital flows after years of rising financial globalization we identify the stylized facts and main drivers of this development the retrenchment in international capital flows is a highly heterogeneous phenomenon first across time being especially dramatic in the wake of the lehman brothers failure secondly across types of flows with banking flows being the hardest hit due to their sensitivity of risk perception and thirdly across regions with emerging economies experiencing a shorter lived retrenchment than developed economies our econometric analysis shows that the magnitude of the retrenchment in capital flows across countries is linked to the extent of international financial integration its specific nature with countries relying on bank flows being the hardest hit as well as domestic macroeconomic conditions and their connection to world trade flows gian maria milesi ferretti and cedric tille

the natural rate of unemployment reflections on 25 years of the hypothesis 1 introduction rod cross part i the theoretical framework 2 the origins and further development of the natural rate of unemployment edmund phelps 3 the natural rate as new classical macroeconomics james tobin 4 theoretical reflections on the natural rate of unemployment frank hahn 5 of coconuts decomposition and a jackass the genealogy of the natural rate huw dixon part ii adjustment ranges of equilibria and hysteresis 6 the economics of adjustment andrew caplin and john leahy 7 hysteresis and memory in the labour market g c archibald 8 models of the range of equilibria ian mcdonald 9 hysteresis revisited a methodological approach bruno amable jerome henry frederic lordon and richard topol 10 is the natural rate hypothesis consistent with hysteresis rod cross part iii empirical tests and macro models 11 the natural rate hypothesis and its testable implications hashem pesaran and ron smith 12 non linear dependence in unemployment output and inflation empirical evidence for the uk david peel and alan speight 13 prices wages and unemployment in the us economy a traditional model and tests of some alternatives albert ando and flint brayton 14 the natural rate in empirical macroeconomic models simon wren lewis part iv political economy 15 is the natural rate of unemployment a useful concept for europe maria demertzis and andrew hughes hallett 16 the natural rate of unemployment a fundamentalist keynesian view meghnad desai 17 politics and the natural rate hypothesis a historical perspective bernard corry

international spillovers of ecb s unconventional monetary policy the effect on central europe abstractwe examine how unconventional monetary policy of the european central bank ecb influences macroeconomic stability in three central european economies we estimate various panel vector autoregressions pvars using monthly data from 2008 to 2014 using the shadow policy rate and central bank assets as measures of unconventional policies we find that output growth and inflation in central europe temporarily increase following an expansionary unconventional monetary policy shock by the ecb using both impulse responses and variance decompositions we find that the effect of unconventional policies on output growth is much stronger than the effect on inflation

country portfolios in open economy macro models this paper develops a simple approximation method for computing equilibrium portfolios in dynamic general equilibrium open economy macro models the method is widely applicable simple to implement and gives analytical solutions for equilibrium portfolio positions in any combination or types of asset it can be used in models with any number of assets whether markets are complete or incomplete and can be applied to stochastic dynamic general equilibrium models of any dimension so long as the model is amenable to a solution using standard approximation methods we first illustrate the approach using a simple two asset endowment economy model and then show how the results extend to the case of any number of assets and general economic structure

a model of the natural rate of unemployment since the publication of edmund phelps volume the new macroeconomics has treated the labor market as a dynamic process of rational search by unemployed workers for available vacancies wages are viewed as at least potentially flexible though free contracting between workers and firms may lead to fixed wages in the short run imperfect information is a crucial element of the theory for it implies both a need for contracting and a need for rational search rather than simple market clearing in each period a positive rate of frictional unemployment may exist in equilibrium denoted as the natural rate this unemployment is due to the frictions in the search process and imperfections in information rather than to any deficiency in aggregate demand milton friedman defined the natural rate as the level that would be ground out by the walrasian system of general equilibrium equations provided there is embedded in them the actual structural characteristics of the labor and commodity markets including market imperfections stochastic variability in demands and supplies the cost of gathering information about job vacancies and labor availabilities the costs of mobility and so on p 8 this paper reexamines the micro foundations of the natural rate in a model of labor market equilibrium in which turnover flows and imperfect information are explicitly considered workers may quit their current jobs to enter the unemployment pool in order to search among available vacancies for a more preferred position firms economize on turnover by an appropriate wage policy

trade capital accumulation and structural unemployment an empirical study of the singapore economy the past three and a half decades witnessed a distinctly declining trend in singapore s unemployment rate which dropped from an average annual rate of 7 85 percent in 1966 70 to 2 74 percent in 1991 2000 the authors seek to identify and empirically examine the factors that have influenced singapore s unemployment rate in an environment of low and stable inflation they incorporate a union bargaining framework into a standard factors trade model in which an increase in the relative price or capital stock in the export sector raises the demand wage that firms can afford to pay relative to workers fall back income and consequently lowers equilibrium unemployment the magnitude of the effects depends on the fall back income the weight unions attach to employment and the elasticity of labor demand which the authors estimate using data on singapore the results show that labor unions in singapore care more about employment than wages together with a small fall back income and elastic labor demand the authors show that given the same percentage change in relative export prices and capital accumulation in the export sector the effect on unemployment is larger for the former however the empirical importance of capital accumulation in the export sector dominates increases in relative export prices in reducing unemployment since the manufacturing sector experienced a tremendous increase in capital inputs throughout the sample period whereas the relative price of exports experienced a far smaller increase and only in the early part of the sample period the authors conclude that through a very open trading regime the tremendous increase in capital stock of the exporting sector has been the main reason behind singapore s declining unemployment rate

the relationships between permanent and transitory movements in u s output and the unemployment rate this paper estimates the permanent and transitory movements in u s output and the unemployment rate and the relationships between them the results suggest that permanent movements in u s output and the unemployment rate are important for explaining overall fluctuations further the correlation between changes in these series arises in large part due to the relationship between their permanent components

unconventional policies and exchange rate dynamics abstract we study exchange rate dynamics under cooperative and self oriented policies in a two country dsge model with unconventional monetary and exchange rate policies the cooperative solution features a large exchange rate adjustment that cushions the impact of negative shocks and a moderate use of unconventional policy instruments self oriented policies nash equilibrium however entail limited exchange rate movements and an aggressive use of unconventional policies in both countries our results suggest that sizable exchange rate depreciations are not always a symptom of beggar thy neighbor policies they could also reflect a desirable process of external adjustment that improves global welfare

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite