price flexibility in developing countries evidence and implications using data for a sample of 50 developing countries the empirical investigation evaluates determinants and implications of asymmetric price flexibility price inflation is characterized by high flexibility to adjust towards full equilibrium further price inflation accelerates flexibly with unanticipated demand growth in both the upward and downward directions in most of the countries under investigation asymmetry indicates higher upward flexibility compared to downward flexibility in many countries aggregate uncertainty determines the degree of asymmetry such that price flexibility is higher with respect to expansionary demand shocks compared to contractionary shocks the higher the variability of aggregate demand across countries in contrast higher trend price inflation increases downward price flexibility across countries output variability decreases with both upward and downward price flexibility in the face of aggregate demand shocks a the views expressed in this article are those of the a

spurious volatility in historical unemployment data this paper shows that the stabilization of the unemployment rate between the pre 1930 and post 1948 eras is an artifact of improvements in data collection procedures prewar methods are used to construct postwar unemployment data that are consistent with the historical data the constructed postwar series is nearly as volatile as the pre 1930 unemployment data the constructed postwar data are systematically more volatile than the actual postwar data because the cyclical behavior of the labor force and productivity are misspecified in the construction procedures the relationship between the actual and constructed postwar unemployment series is used to construct new historical data

world war i and the postwar depression a reinterpretation based on alternative estimates of gnp abstract this paper examines the official commerce department estimates of gross national product for 1909 1928 and suggests that they are far inferior to the less commonly used kendrick gnp estimates the paper then derives a revised version of the kendrick series that alters significantly the representation of annual movements in gnp before 1919 this endorsement of a revised kendrick gnp series in place of the official commerce department estimates before 1929 suggests that aggregate demand movements had much less effect on real output during world war i and the depression of 1921 than is commonly believed

the phillips curve the persistence of inflation and the lucas critique evidence from exchange rate regimes comment we present evidence from the united states and the united kingdom that the persistence of price inflation is significantly higher under managed exchange rate regimes than under gold based fixed exchange rate regimes these differences are also reflected in expectations augmented phillips curves we use a two country macro model with forward looking price setters to demonstrate that higher monetary accommodation of inflation and exchange rate accommodation of inflation differentials increase inflation persistence the evidence does not contradict this hypothesis it supports the hypothesis of forward looking price setters and highlights the empirical significance of the lucas critique jel e31 e42 f33

what explains wage gaps between farm and city exploring the todaro model with american evidence 1890 1941 nominal wage gaps between farm and city employment are one of the most pervasive aspects of modern economic growth so much so that they have become a key stylized fact of development economics indeed a good portion of the literature on the third world has focused on this problem at length both in terms of labor market behavior and in terms of policy formation in the face of factor market distortions yet wage gaps are not simply an institutional peculiarity of newly industrializing third world countries since they seem to have been even greater among nineteenthand twentieth century western nations while unskilled full time nominal city wages are about 41 higher than farm wages in the contemporary third world they were about 51 higher among late nineteenth century industrializers they were even higher in england in the 1830s about 73 2 furthermore the evidence suggests that these wage gaps vary substantially over time they rose from 29 to 41 in the american north between the antebellum and postbellum periods and were about 50 by the mid 1890s in the united states as a whole a figure that reached an all time u s high of about 65 by the late 1930s 3 there are three questions that these wage gaps raise not just one first would these nominal full time wage gaps disappear if they were properly measured proper measurement would include the fact that cities are more costly places to live that cities may have greater disamenities that farmers also make in kind payments to their workers and that farm laborers suffer seasonal underemployment elsewhere

urban growth and productivity the case of greece the present paper reports an attempt to estimate the role of urbanisation economies in greek industry using a flexible form of production function obtained from a taylor series expansion of a polynomial it is estimated that the labour productivity of the manufacturing sector is five per cent higher with each doubling of urban population the substantial advantages to urban production seem to be at the heart of the urbanisation process that accompanied industrialisation in greece the policy implications are that decentralisation policies may be justifiable on regional equity but not on economic efficiency grounds selection and promotion of a few urban centres in each region would be a more successful regional policy

spatial variations in new manufacturing plant openings some empirical evidence from greece fotopoulos g and spence n 1999 spatial variations in new manufacturing plant openings some empirical evidence from greece reg studies 33 219 229 this research deals with the determinants of regional variation in new plant openings in greek manufacturing industries over the period 1980 91 key findings of this first detailed attempt to do so in a greek context relate to the significant direct effects of regional specialization the extent of local production links and investment in public infrastructure on new manufacturing activity confirming research findings in other countries the results obtained here indicate small firm presence the local supply of skilled labour and wealth and labour productivity differentials across regions to be significant and positive influences on new firm formation fotopoulos g et spence n 1999 la variation geographique de la creation d entreprises industrielles quelques preuves empiriques provenant de la grece reg studies 33 219 229 cet article traite

is increased nominal flexibility stabilizing some international evidence this paper studies the impact of the increased rigidity on macroeconomic fluctuations the author uses this evidence to test the validity of two major keynesian explanations the first is the conventional sticky wage sticky price explanation that suggests that the increased nominal rigidity ceteris paribus is destabilizing the second is a recently developed explanation that suggests that the increased flexibility is destabilizing the author s results are consistent with the conventional implications copyright 1991 by the london school of economics and political science

investability the key to competitive regions and cities this article proposes and develops a concept investability that can be used for analysing the competitive position of cities or regions and formulating policy responses it can be defined as conditions that are conducive to a higher level of investment and refers principally to the business environment in which economic agents operate the paper discusses various influences on investment decisions and how they will impinge on different classes of potential investors policy implications are developed and the ways in which the concept might be used in policy making are examined

regional policy and investment behaviour the case of greece 1971 1982 louri h 1989 regional policy and investment behaviour the case of greece 1971 1982 reg studies 23 231 239 the present paper reports an attempt to evaluate the relative effects of regional policy on investment in greek manufacturing industry during 1971 82 a generalized neoclassical model of investment behaviour is used allowing for separate estimates of the effects of different policy instruments both regional investment incentives and infrastructure expenditures were found to exert a significant influence on capital formation simulations with alternative policy combinations showed that if incentives were accompanied by more equally distributed infrastructure expenditures the cost of the policy would be the same but its effects would be enhanced an equal amount of investment would be created with a fairer regional distribution louri h 1989 la politique regionale et le comportement d investissement etude de cas de la grece de 1971 a 1982 reg studies 23 231 239 cet article fait un comp

changes in the cyclical sensitivity of wages in the united states 1891 1987 the conventional wisdom that nominal wages became less sensitive to the business cycle and more autocorrelated after world war ii is reexamined here by considering whether these properties are artifacts of the methods used to construct prewar wage series a replication based on these methods is more cyclically sensitive and exhibits less autocorrelation than the postwar data aggregation using variable instead of fixed employment weights also greatly exaggerates the cyclicality of prewar wages these biases imply that wages are just as sensitive to the cycle today as one hundred years ago perhaps even more so copyright 1992 by american economic association

electricity planning and implementation in sub saharan africa a systematic review abstract universal electricity access is an important development objective and the focus of a number of key global un initiatives while robust electricity planning is widely believed to be a prerequisite for effective electrification to date no comprehensive overview of electricity planning research has been undertaken on sub saharan africa the world region with the lowest access rates this paper reviews quantitative and qualitative electricity planning and related implementation research considering each of the 49 sub saharan african countries the four regional power pools and the sub continent as a whole applying a broad understanding of electricity planning and a practical limit of 20 reviewed articles per country and region 306 relevant peer reviewed journal articles are included in this review a general classification scheme is introduced that classifies the planning literature along the addressed value chain depth number of different analysed criteria and number of evaluated decision alternatives the literature is found to be strongly clustered in a few countries with less than 5 identified relevant articles in 36 of the 49 countries the total amount of articles per year is clearly increasing over time addressing technology choice operation distribution and implementation analyses although including different high level criteria in analysing electricity systems is common the literature is only starting to use formalised multi criteria decision making mcdm tools the review indicates that 63 of relevant articles favour renewable energy technologies for their given problems frequently mentioned success factors for electrification in sub saharan africa include adequate policy design sufficient finance and favourable political conditions while considerable regional and methodological literature gaps are apparent the literature in this review identifies a rich and fruitful ground for future research to fill these gaps

performance indicators in higher education a survey of recent work this article surveys recent work on the construction of performance indicators in higher education focusing particular attention on degree results student wastage and research output performance indicators ought to provide measures of value added by the various institutions under review as such crude measures of output which fail to take account of input differences across institutions are inappropriate so it is necessary to investigate what factors underlie inter institution differences in measured output in order to correct for input variations in assessing overall performance the absence of market prices for teaching and research outputs severely hinders the construction of composite measures of the performance of higher education institutions since in their absence no objective weights can be assigned to the different roles of these institutions the resource implications of performance measurement exercises need to be clarified if rankings exercises are to have the desired incentive effects copyright 1992 by oxford university press

price prediction errors and real activity a reassessment price prediction errors and real activity a reassessment i introduction macro models employing rational expectations and natural rate assumptions have proven to be powerful and tractable analytical tools in these models output and employment fluctuations are typically demand driven with aggregate demand disturbances transmitted to the real sector through price prediction errors the waning popularity of natural rate models is due in part to the widely held belief that although theoretically appealing the models are of questionable empirical relevance this view appears to be based on a small number of studies which fail to find evidence of a robust empirical relationship between price level surprises and aggregate real activity indeed the available evidence has led some influential macroeconomists to conclude that the channels through which aggregate demand influences the economy have yet to be identified 1 this has had the two fold effect of i stimulating research on channels other than price through which aggregate demand may affect the economy and ii discouraging research on channels that do act through the price level while the first of these effects may be desirable the second is of concern this paper is motivated by our conviction that potentially valuable research has been discouraged on the basis of thin and seriously suspect evidence the sections that follow reassess the role of price prediction errors in determining aggregate real activity we provide evidence that the inability of other researchers to verify a positive correlation between demand driven price prediction errors and real activity is due to misspecified models and in some cases inappropriate estimation procedures we demonstrate that in a more correctly specified and estimated model the relationship between price surprises and real activity is positive and strongly significant thus we conclude that previous researchers were incorrect in discarding the major natural rate paradigms as empirically irrelevant these models do appear to identify an important channel namely price surprises through which aggregate demand influences the real sector ii issues and early evidence price prediction errors play a central role in the most prominent natural rate macro models these models typically fall into one of two general classes equilibrium models and contracting models in both classes of models unanticipated movements in the price level are the channel through which aggregate demand disturbances influence the real sector the exact nature of transmission process however differs across the two sets of theories equilibrium models of the sort pioneered by lucas 1973 depend on the assumption of incomplete information to produce non neutrality of aggregate demand disturbances in the best known examples of this kind of model confusion between relative and aggregate price movements causes firms to react to unanticipated price level movements as though they were at least in part relative price movements thus positive price level shocks cause all firms to increase output and generate positive deviations of aggregate output from its natural rate contracting models as developed in the work of fischer 1977 and gray 1976 depend on contractually set wages to produce non neutrality in these models nominal wages are incompletely responsive to unexpected changes in the price level during the term of the contract under which they are set consequently an unanticipated rise in the price level causes a fall in the real wage of all workers whose contracts are not in the process of renegotiation at that moment with employment determined by the firm during the contract interval the result is a rise in aggregate employment and output our present concern is with testing the common implications of equilibrium and contracting models possibilities for distinguishing between the two classes of models are explored in separate work

consumer sentiment and consumer spending decomposing the granger causal relationship in the time domain it is often believed that the consumer sentiment index has predictive power for future consumption levels while granger causality tests have already been used to test for this no attempt has been made yet to quantify the predictive power of the consumer sentiment index over different time horizons in this article we decompose the granger causality at different time lags by looking at a sequence of nested prediction models since the consumer sentiment index turns out to be cointegrated with real consumption we resort to error correcting models four consumption series are studied namely total real consumption real consumption of durables non durables and services among other findings we show that the consumer sentiment index granger causes future consumption with an average time lag of 4 5 months furthermore it is found that the consumer sentiment index has more incremental predictive power for consumption of services than for consumption of durables or non durables and that the index is not

is increased price inflexibility stabilizing this paper examines a basic question the link between the degree of price flexibility and the variability of output the two standard intermediate macroeconomic textbook models are the classical and the keynesian model in the keynesian model prices are assumed to be perfectly rigid and output adjusts on the other hand in the classical model prices are completely flexible and output is perfectly stable the two models suggest that as prices become more flexible output should become less variable now since mundell 1963 pointed it out it has been well known that the price level and the expected rate of change of the price level that is the expected inflation rate exert opposing forces on the level of output in a static keynesian model since inflation is an essentially dynamic phenomenon the static mundell effect prompts a natural consideration of the link between the degree of price flexibility and the variability of output in a dynamic context tobin 1975 presents a formal model where lower prices work to move the economy toward full employment but an expectation of falling prices raises the real interest rate and moves the economy away from full employment recently delong and summers 1986a 1986b driskill and sheffrin 1986 and king 1988 have rejuvenated interest in the question of whether increased price flexibility inflexibility will stabilize or destabilize output while driskill

reviving the federal statistical system the view from academia there is a tendency to think of official government statistics as unambiguous measures of economic activity in truth however nearly all of the available series are based heavily on assumptions and are sensitive to the estimation techniques used furthermore many of these assumptions and estimation techniques have been refined and improved over time whether these underlying assumptions are reasonable and whether the refinement of assumptions over time has been useful depends crucially on the questions one is trying to answer for example an estimate of consumption derived from data on retail sales may be perfectly adequate for planning future production or setting government budgets but may be disastrous for testing a subtle economic theory similarly gathering more genuine consumption data might improve our current estimates of consumption but a series that reflects retail sales for one era and genuine consumption for another could wreak havoc when used in estimating a time series rela

on the aggregate welfare cost of great depression unemployment abstract the potential benefit of policies that eliminate a small likelihood of economic crises is calculated an economic crisis is defined as an increase in unemployment of the magnitude observed during the great depression for the u s the maximum likelihood estimate of entering a depression is found to be about once every 83 years the welfare gain from setting this small probability to zero can range between 1 and 7 of annual consumption in perpetuity for most estimates more than half of these large gains results from a reduction in individual consumption volatility

the ups and downs of capitalism ben bernanke is a leading macroeconomist who has contributed extensively to the literature on business cycles monetary policy the role of financial markets in economic fluctuations inflation targeting and the economics of the great depression he is one of the six economists who form the nber business cycle dating committee a group that determines the dates of recessions in the us in this article interview professor bernanke discusses issues relating to the great depression of the 1930s and problems relating to inflation in the latter half of the twentieth century

voter turnout in us presidential elections does carville s law explain the time series we estimate a time series model of voter turnout for 34 us presidential elections 1880 2012 employing a variety of econometric techniques our major results are as follows 1 a negative and significant structural shift in voter turnout occurs in 1972 and is too large to be explained by the lowering of the voting age 2 the 1972 shift is the only statistically significant structural shift to occur since the first decade of the twentieth century 3 short term macroeconomic conditions significantly impact turnout with unemployment having a positive effect 4 turnout in recent presidential elections has not deviated significantly from the post 1972 norm 5 turnout is positively related to the expected closeness of the election outcome but contrary to some theoretical predictions closeness exhibits no trend over time

measuring price level uncertainty and instability in the united states 1850 2012 abstract we measure price level uncertainty and instability in the united states over the period 1850 to 2012 major outbreaks of price level uncertainty and instability occur both before and after world war ii alternating with three price level moderations one near the turn of the twentieth century another under bretton woods and a third in the 1990s there is no evidence that the price level was systematically more stable or less uncertain before or after world war ii moderations sometimes involved links to gold but the experience of the 1990s proves that a well managed fiat regime can achieve the same outcome

some evidence on demand fluctuations and the increased stability of the post war american economy this paper investigates the implications of a sticky wage contracting model that can explain both the decline in wage and price flexibility and the increased stability of the post war american economy the reduction in the size of demand shocks in the post war period has increased agents incentives to write longer contracts though longer contracts have rendered real activity more responsive to demand shocks in the post war period the reduction in the size of these shocks has dominated the increase in the size of response to a particular shock overall real activity has become more stable in the post war period as predicted by theory

the impact of macroeconomic conditions in childhood on adult labor market outcomes this study examines the influence of business cycles in childhood on economic performance later in life i relate unemployment rates between the year before one s birth and the year of one s 15th birthday to schooling employment and income as an adult the analysis exploits variation in macroeconomic conditions across states over time i address a number of identification challenges related to cohort effects linear trends current events and economic persistence the caregiving behaviors and background characteristics of parents are also studied the average unemployment rate in childhood normally has a negative effect on human capital in adulthood jel j11 j24 j31

is price flexibility destabilizing sluggish wages and prices are generally the culprits in keynesian models of unemployment and business fluctuations price flexibility in standard fix price models would restore the economy to full employment this line of reasoning has often been at the heart of proposals to reform institutions in order to restore flexibility to wages and prices there is however a strand of macroeconomic thought that questions the wisdom of too much price flexibility john maynard keynes raised the issue in chapter 19 of the general theory by noting that a deflation could raise real interest rates and thereby impede a return to full employment in his 1975 paper keynesian models of recession and depression james tobin develops this point in a formal model low prices work to move the economy to full employment but falling prices to the extent that they lead to expectations of deflation raise the real interest rate through the mundell effect and move the economy away from full employment instability is likely to occur if expectations of inflation adjust rapidly to actual inflation and the real interest rate effect is large our historical experience does include significant episodes where either reductions in inflation or actual deflation were accompanied by high real interest rates although other factors could be responsible the experiences of the great depression the latin american countries in the late 1970 s and the united states in the early 1980 s all add surface plausibility to the real interest rate deflation link and thus to one aspect of the keynes tobin story recently bradford de long and lawrence summers 1984 have argued that the decrease in the variance of output following world war ii can be largely attributable to the decrease in wage and price flexibility in the postwar era the reason output fluctuations are smaller today is precisely because the keynes tobin destabilizing mechanism is less operative today this paper examines whether increased price flexibility can be destabilizing in a version of john taylor s contract model 1979 1980 extended to include real interest rate effects taylor s model includes both backward and forward elements in wage setting behavior and thus permits some rationality in the wage setting process we find that even with this limited degree of rationality increased wage flexibility leads to a decrease in both the variance of output and the variance of prices nicholas carlozzi and taylor 1983 introduce the real rate of interest into a staggered contract framework and discuss in general terms and through simulations the effects that changing real rates may have on the system they do not however study the effects of potential instability through increases in wage flexibility or provide any analytical results they provide an extensive discussion of the implications of alternative policy rules on the stochastic behavior of the economy we first add the real interest rate to the standard taylor model and derive the solution and prove key analytical results these results are further buttressed by simulations

inflation unemployment regimes and the instability of the phillips curve using the statistical technique of fuzzy clustering regimes of inflation and unemployment are explored for the united states the united kingdom and germany between 1871 and 2009 we identify for each country three distinct regimes in inflation unemployment space similarities exist across countries in both the regimes and the timings of the transitions between regimes however the typical rates of inflation and unemployment experienced in the regimes are substantially different further even within a given regime the results from the cluster analysis reveal persistent fluctuations in the degree of attachment to that regime of inflation unemployment observations over time the economic implications of this are that first the inflation unemployment relationship or phillips curve experiences from time to time major shifts second that it is also inherently unstable even in the short run it is likely that the factors which govern the inflation unemployment trade off are so multi dimensional that it i

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

bank fragility money under the mattress and long run growth us evidence from the perfect panic of 1893 abstract this paper examines how the us financial crisis of 1893 affected state output growth between 1900 and 1930 the results indicate that a 1 increase in bank instability reduced output growth by 2 5 a comparison of nebraska which had one of the highest bank failure rates with west virginia which did not experience a single bank failure reveals that disintermediation affected growth through a portfolio change among savers people simply stopped trusting banks time series evidence from newspapers indicates that articles containing the words money hidden significantly increase after banking crises then slowly die out

on the real effects of short and long run inflation and relative sector price variability some empirical evidence using the kalman filter this paper evaluates empirically the effects of sector relative price variability and short run and long run inflation on the growth rate of real output in the united states since 1947 also permanent and transitory estimates are constructed to evaluate the effects of unanticipated movements in sector relative price on the growth rate of real output the results show a statistically significant inverse relationship beween the growth rate of real output and transitory sector relative price variability and anticipated long run inflation and a direct relationship between the growth rate of real output and unanticipated short run inflation

the natural monopoly test reconsidered an engineering process based approach to empirical analysis in telecommunications this paper suggests an extension of the traditional natural monopoly cost subadditivity test as it has been implemented in telecommunications we explore two dimensions of generalization that we believe are important when evaluating the relative performance of monopoly versus duopoly first by using a flexible engineering process model of the local exchange network we are able to generate market structure specific cost data which are used to estimate various duopolistic firm cost functions second we combine these cost functions which correspond to specific entry strategies with appropriate models of firm behavior to calculate market equilibria this allows us to perform in addition to a standard strictly cost based natural monopoly test a comparison of monopoly and duopoly on the basis of aggregate social welfare achieved under those alternative market structures our application of the methodology to a stylized local exchange market directs attention to a possible conflict between these alternative testing criteria and highlights the crucial impact of the nature of competitive entry on the social welfare performance of deregulated markets

the cyclical structure of the uk inflation rate 1210 2016 abstract in this paper we examine the cyclical structure of the uk inflation rate using historical data dating back to 1210 based on a methodology that allows for fractional orders of integration at a non zero frequency and stochastic cycles the results indicate the presence of cycles that repeat themselves approximately every 4 years and that the order of integration is constrained between 0 10 and 0 20 implying long memory moreover this pattern seems to be stable over time

macroeconomic effects from government purchases and taxes for u s annual data that include world war ii the estimated multiplier for temporary defense spending is 0 4 0 5 contemporaneously and 0 6 0 7 over 2 years if the change in defense spending is permanent gauged by ramey s defense news variable the multipliers are higher by 0 1 0 2 since all estimated multipliers are significantly less than 1 greater spending crowds out other components of gdp particularly investment the lack of good instruments prevents estimation of reliable multipliers for nondefense purchases multipliers in the literature of two or more likely reflect reverse causation from gdp to nondefense purchases increases in average marginal income tax rates measured by a newly constructed time series have significantly negative effects on gdp when interpreted as a tax multiplier the magnitude is around 1 1 the combination of the estimated spending and tax multipliers implies that the balanced budget multiplier for defense spending is negative we have some evidence that tax changes affect gdp mainly through substitution effects rather than wealth effects

learning and the dynamics of consumer unsecured debt and bankruptcies during the great moderation the consumer unsecured debt to income ratio nearly doubled and the personal bankruptcy filing rate more than quadrupled this historically tranquil period ended in 2008 with a severe recession and a protracted credit crunch we develop a theory of learning in which consumers and lenders adjust their beliefs about the riskiness of the economic environment over time in response to the realized sequence of aggregate shocks and then embed it into an otherwise standard quantitative model of consumer default simulations of the model suggest that learning can explain as much as half of the recent boom and bust cycle in consumer unsecured debt and a modest fraction of the rise in bankruptcy filings prior to 2005

excess sensitivity of high income consumers using new transaction data i find considerable deviations from consumption smoothing in response to large regular predetermined and salient payments from the alaska permanent fund on average the marginal propensity to consume mpc is 25 for nondurables and services within one quarter of the payments the mpc is heterogeneous monotonically increasing with income and the average is largely driven by high income households with substantial amounts of liquid assets who have mpcs above 50 the account level data and the properties of the payments rule out most previous explanations of excess sensitivity including buffer stock models and rational inattention how big are these mistakes using a sufficient statistics approach i show that the welfare loss from excess sensitivity depends on the mpc and the relative payment size as a fraction of income since the lump sum payments do not depend on income the two statistics are negatively correlated such that the welfare losses are similar across households and small less than 0 1 of wealth despite the large mpcs

a measure of the u s output gap abstract an autoregressive distributed lag regression of the unemployment rate on output growth is structurally stable over the 1890 1986 period inverting this equation yields a measure of the output gap which is not subject to the spurious detrending problem

productivity and city size a critique of the evidence a critique of two leading articles in the productivity and city size literature results in revised estimates of the productivity advantages of large cities in particular extant estimates of the elasticity of productivity with city size are revised downward by over 100 percent for the manufacturing sector and about 25 percent for the entire urban economy after revision productivity advantages of larger cities are found to be much larger for the nonmanufacturing sector than for the manufacturing sector hence revitalization policies for large cities should be focused on nonmanufacturing sectors

regional income growth and net migration in sweden 1970 1995 this paper concerns the regional growth pattern in sweden and the purpose is to analyse what factors determine the growth rate of average income and the net migration at the regional level we fin

anticipated money unanticipated money and output 1873 1930 anticipated money unanticipated money and output 1873 1930 i introduction this paper examines the roles of anticipated and unanticipated money in the period between the civil war and the depression 1 such an examination is warranted for at least two reasons first estimation of the impact of anticipated and unanticipated money on output for historical periods can enhance our understanding of the responses of economic activity to these key variables 2 second recent work has shown that traditional historical estimates of output may be faulty see romer 1986a 1986b 1986c 1988 not only do most studies investigating the economic roles played by anticipated and unanticipated money concentrate on the post world war ii era those that discuss the period before world war ii such as rush 1985 1986 use traditional data indeed despite the interesting analyses by rush if the validity of the conventional data on output and unemployment for the era under consideration is rejected then virtually no results on the importance of monetary and real factors for economic activity are available for this important period thus further discussion of this topic is needed to answer two important questions what do the revised data show us about the historical economy do these revisions change the inferences drawn about monetary influences on economic activity the analysis presented here is comprehensive in that a wide range of output measures are employed both in terms of the types of output and in terms of the manner in which the output measures are constructed given this variety in the output measures consistent results on the effects of anticipated and unanticipated money across output measures indicate that conclusions drawn from the analysis are robust in particular the empirical results presented below support the following hypotheses i that anticipated m2 and monetary base growth have no effect on output regardless of the output measure used ii that unanticipated m2 and monetary base growth do effect output regardless of the output measure used and iii that changes in financial intermediation may be important for the evolution of output over time support for hypotheses i and ii is consistent with the monetary explanation of business cycles support for hypotheses iii may be consistent with real explanations of business cycles if exogenous shocks to the monetary production technology subsequently affect output 3 taken together the joint support for hypotheses i iii suggests that at a minimum neither the real nor the monetary explanations for historical u s business cycles can be discounted without additional work the remainder of the paper is organized as follows section ii presents a brief overview of the historical period under consideration along with a discussion of prior work on the effects of anticipated and unanticipated money on output determination during this time period section iii discusses the data and the methodology the empirical results are presented in section iv and the conclusions in section v ii overview the historical period the period under investigation 1873 1930 is one of substantial economic change banking panics the return to the gold standard the founding of the federal reserve system and world war i are some of the more important events occuring during this period we consider the role played by expected and unexpected money in output determination for several major subperiods while data availability largely determined the selection of these subperiods they generally correspond to major economic events despite the structural and institutional changes over the period we also examine the roles of anticipated and unticipated money growth in the determination of output over the entire time period to be valid tests of the impact of money growth on output require a reasonable degree of homogeneity in the economic environment

changes in business cycles evidence and explanations this paper shows that the volatility of annual real macroeconomic indicators for the united states and the average severity of recessions have declined only slightly between the pre world war i and post world war ii eras recessions have however become somewhat less frequent and more uniform it argues that the advent of macroeconomic policy after world war ii can account for both the observed continuity and change countercyclical monetary policy and automatic stabilizers have prolonged postwar expansions and prevented severe depressions at the same time policy induced booms and recessions have led to continued volatility of the postwar economy

is price flexibility destabilizing abstract increased price flexibility causes temporary output deviations to be eliminated more quickly but it also makes the effects of inflationary expectations on aggregate demand larger so it can lead to increased output variability this trade off is assessed for an open economy and only limited support is found for keynes concern that increased price flexibility is destabilizing the dependence of this issue on exchange rate policy and on alternative specifications for sticky prices is emphasized

disaggregate evidence on price stickiness and implications for macro models i introduction fashions that take hold of the field of macroeconomics share important characteristics with the economy its practitioners seek to understand approaches that are in vogue exhibit cycles with varying frequencies and amplitudes during the 1960s theories based on assumptions of widespread wage and price stickiness dominated the landscape the new classical macroeconomics that emerged in the 1970s challenged the preeminence of these keynesian theories and by the mid 1980s real business cycle theories assuming widespread price flexibility received a considerable portion of macroeconomists attention beginning in the early 1990s as reviewed by gordon 1990 mankiw 1990 and mankiw and romer 1991a 1991b a keynesian counterrevolution occurred and by the conclusion of the 1990s sticky price theories had regained much of their luster today as discussed by woodford 2003 price stickiness is a fundamental building block of numerous theories aimed at explaining both movements in domestic variables such as employment and real output and changes in international variables such as the trade balance and the current account there has as we discuss below been empirical work seeking to determine whether real world data might be consistent with the implications of macroeconomic theories with inflexible product prices there has been very little work however to determine whether the most influential approaches to testing the reasonableness of micro based models of price stickiness support the underlying assumption of widespread price rigidities at the micro level instead leading studies in the literature examine only aggregate data we find this quite surprising given that so many modern macroeconomic models consider economies populated with representative producers that establish an array of product prices that are fixed in the short run which in most models is commonly taken to be the current period of analysis are most product prices really sticky bils and klenow 2004 have addressed this question by studying the frequency of price adjustments for 123 categories of consumer goods and services their answer is that most prices in fact change relatively frequently with about half of prices changing roughly every 4 or 5 too although they found that the prices of certain services and what they call processed physical goods adjust more slowly their overall results offer relatively little support for sticky price models in this paper we also examine microeconomic data for the united states in contrast to bils and klenow however we examine industry level data on firm prices and costs we employ the empirical methodology proposed by the highly influential study by gali and gertler 1999 which in turn is based on the micro based analysis of imperfect competition and price stickiness proposed by calvo 1983 nevertheless our conclusions are broadly similar to those of bils and klenow overall we find that across the industries to which we are able to apply the gali gertler style approach no more than 43 of total sales are generated by industries with estimated periods of price adjustment of 6 quarters or more this percentage drops to below 23 when the discount factor is restricted to reasonable values and under these restrictions industries accounting for at least 36 of all sales in the industries we analyze have estimated price adjustment intervals of less than 2 quarters in all empirical approaches we consider unrestricted analyses producing estimates of industry specific discount factors at least 44 of total sales of the industries we consider are generated by industries with estimated price adjustment speeds of less than 1 yr furthermore in most specifications the unweighted average price adjustment interval for all industries is below 1 yr and the weighted average using industry shares of total sales as weights price adjustment interval for all specifications ranges from no higher than 3

the benefits of commitment to a currency peg aggregate lessons from the regional effects of the 1896 u s presidential election we develop a method to use the one time cross sectional impact of a cleanly identified shock to identify its aggregate impact through the use of a factor model we apply this methodology to evaluat

keeping the keynesian faith this wide ranging discussion takes in the development of macroeconomics and the influence of ideas and events on that development the nature and causes of the great depression keynesianism lessons from the high inflation period of the 1970s the role of macroeconomic policy and the idea of the new economy

quantitative assessment of tariff endogeneity abstract the paper provides a quantitative assessment of the tariff endogeneity hypothesis in the macro context for the interwar and postwar u s economy there is an almost unidirectional causality running from unemployment and trade deficit to the average tariff rate during the interwar period while more interactive relationships hold in the postwar period compared with the interwar era there is a decline in the dependence of tariff on unemployment and trade deficit but the individual effect of unemployment on tariff has increased and that of trade deficit has decreased furthermore unanticipated shocks exert smaller and less persistent effects of tariff

is deflation costly after all the perils of erroneous historical classifications i estimate average economic activity during periods of inflation and deflation while accounting for measurement errors in 19th century prices these measurement errors lead to underestimation overestimation of economic activity during periods of inflation deflation by exploiting multiple deflation indicators it is possible to recover the true relationship the shortfall of us industrial production growth during periods of deflation ranges from 4 5 pp to 7 6 pp instead of 2 pp i also find a negative relationship between deflation and real activity in the uk i then examine the cross country variation in the estimates for eleven countries the patterns are consistent with stronger biases for countries with more serious measurement errors in prices

how sustainable is policy incoherence a rationalist policy analysis of the cameroonian electricity reform abstract instead of being the milestone in cameroon s economic reform program that the international finance corporation ifc claimed it would be the 2001 privatisation of the cameroonian electricity sector has turned out to be a millstone round the government and country s neck this paper documents and analyses the multidimensional incoherence embedded in the cameroonian electricity sector reforms initiated under the pressure of structural adjustment credit projects led by the world bank more specifically 12 policy incoherencies are examined in the cameroonian context they range from a poor understanding of the electricity sector s problems to pre determined solutions and important shortcomings in the assessment of possible impacts the results of these policy inconsistencies are analysed in terms the sector s sustainability based upon the five key concepts introduced by bruntland suggesting that the reforms have failed to promote social environmental or economic sustainability although this study concerns cameroon its relevance goes beyond this specific country as similar policies are being implemented around the world

intertemporal speculation devaluation and the j curve abstract this paper presents a new explanation of why j curves i e the tendency of the trade balance to deteriorate immediately after a devaluation and to improve only as time passes may arise the paper focuses on the consequences of price stickiness if prices are sticky the devaluation leads first to asn increse in the relative price of tradables which tends to improve the trade balance and second to rising prices of tradables following the devaluation which tends to temporarily worsen the trade balance as a result of intertemporal speculation if the latter effect dominates a j curves results

what differentiates industrial business cycles a cross country investigation theoretical explanations appear in sharp contrast concerning the determinants of demand driven industrial business cycles aggregate factors are likely to differentiate cyclical fluctuations for a given industry across countries industry specific factors are likely to differentiate cyclical fluctuations across industries of a given economy the differences are evaluated using data for industries producing private domestic output across a group of major industrial countries aggregate factors dominate industryspecific factors in explaining industrial cyclical fluctuations in response to aggregate demand shifts consistent with the various explanations higher variability of aggregate demand moderates the response of industrial output to aggregate demand shifts across countries contrary to the implications of the new classical imperfect information model cyclical fluctuations in industrial output appear also smaller in response to higher trend price inflation across countries business cycles appear the

has fiscal policy helped stabilize the postwar u s economy abstract in this paper i consider whether postwar fiscal policy has helped stabilize the u s economy i do this by adding to the stochastic growth model fiscal policy feedback rules estimated from postwar data these rules allow fiscal policies to respond to current and lagged output and labor hours i use the estimated policy rules to see if postwar fiscal policy reduces output volatility and or lengthens expansions and shortens recessions i find that fiscal policy in general provides little stability on either count i also find that the endogenous feedback links by themselves can provide some stabilization

price flexibility and aggregate stability new evidence and implications i introduction is increased price flexibility stabilizing the importance of this question can be easily established by observing the number of recently published papers in which this question or a slight modification of it has appeared in their titles 1 while most economists would answer this question affirmatively a strand of macroeconomic thought that questions the wisdom of too much price flexibility has recently regained some attention 2 in the most widely discussed of this recent literature delong and summers 1986b question the wisdom of too much price flexibility their work was motivated by some of the ideas expressed by keynes 1936 and formally articulated by james tobin 1975 low prices work to move the economy to full employment but falling prices to the extent that they lead to expectations of deflation raise the real interest rate through the mundell effect and move the economy away from full employment in a version of taylor s 1979 wage setting model delong and summers show that instability is likely to occur if expectations of inflation adjust rapidly to actual inflation and the real interest rate effect is large this view presents a direct challenge to mainstream keynesian models of business cycles 3 according to these models sluggish wages and prices are generally the culprits of unemployment and business fluctuations an exogenous institutional increase in the degree of price inflexibility increases the size of quantities adjustment in response to aggregate demand shocks in the current period and over time the assumption of exogeneity is consistent with the view that wage and price rigidity are the result of an institutional structure that is relatively unresponsive to changes in the underlying economic conditions in gray and kandil 1991 we find this view unappealing considering recent efforts to rationalize nominal rigidities as the outcome of explicit optimization exercises 4 it is for this reason that we examine the relationship between price flexibility and output variability in a framework in which both are endogenously determined in the model we develop price rigidity is attributed to the length of contractual wage agreements an increase in contract length will occur if the costs of negotiating contracts rise or the amount of uncertainty impinging on the economy declines in the first case declines in wage and price flexibility will be accompanied by decreased stability of output in the latter case the opposite will occur the reduction in the size of stochastic disturbances impinging on the economic system has a direct stabilizing impact on real output concurrently the reduction in the degree of uncertainty increases agents incentives to write longer contracts the increased rigidity is destabilizing this destabilizing impact is dominated however by the direct stabilizing impact the implications of the alternative views can be contrasted in many respects in kandil 1991b i test the relation between measures of wage and price flexibility and the size of macroeconomic fluctuations across a group of ten major industrial countries the analysis of this paper extends this research in several directions first the analysis provides a formal illustration of the channels through which price flexibility may differentiate the real effects of specific shocks underlying aggregate demand and in turn aggregate variability the framework approximates the key relationships for the theoretical debate under consideration these relationships are replicated empirically to establish the validity of the hypotheses that differentiate the alternative views second the analysis provides a more formal attempt towards quantifying the structural shocks underlying aggregate demand these shocks are the driving forces of economic instability and in turn they are crucial to the debate on the stabilizing effects of price flexibility

contraction and expansion the divergence of private sector and public sector unionism in the united states the institutional structure of the american labor market changed remarkably from the 1950s and 1960s to the 1980s in the 50s and 60s trade unions seemed permanently established in the private sector of the economy a third of nonagricultur al wage and salary workers and over half of blue collar workers were union members hundreds of thousands of workers voted annually in national labor relations board nlrb representation elections to join unions most large firms sought stable collective bargaining relations with their unions by contrast in the public sector only 10 12 percent of workers were union members fewer were covered by collective bargaining contracts and most experts regarded public employees as intrinsically nonorganizable according to afl cio president george meany it was impossible to bargain collectively with the government kramer 1962 p 14 the massive contraction of unionism in the private sector and expansion in the public sector in the 1970s and 1980s see exhibit 1 has produced an utterly different situation today in the private sector the proportion of wage and salary workers in unions plummeted to 14 percent in 1986 a level comparable to that in the great depression only a minuscule number of workers joined unions through nlrb elections and national companies openly proclaimed their intent to establish a union free environment by contrast in the public sector over a third of the work force was unionized some 40 percent were covered by collective contracts 1 and 1 estimates of organization in the public sector differ somewhat among sources though all data show greater organization than in the private sector see freeman ichniowski and zax forthcoming for a detailed analysis of the various statistics

historical perspectives and the interpretation of unemployment jn the last decade the levels of unemployment in industrialized countries have risen dramatically rates now are typically two and in some cases three and four times those prevailing in the 1950s and 1960s the fact that these new higher levels are widely tolerated suggests that our thinking about the meaning and significance of unemployment has changed enormously over the period such a change is certainly present in the thinking among professional economists in the 1960s the standard view was that the unemployed represented unutilized resources their existence in an economy where the vast majority of people had unsatisifed wants was seen as a major social paradox and the most important unsolved intellectual puzzle of the capitalist economic system this fed the rationale for keynesian countercyclical fiscal policy and government deficit spending the government could reasonably print money in order to hire the unemployed because the resources absorbed in the process were essentially free goods today a good number of professional economists certainly in the united states but to a lesser extent throughout the world have come to view measured unemployment in industrial economies as an artifact in at least three senses it is a statistical artifact of a measurement process that classifies as unemployed people who are not really available for work it is an institutional artifact of a system of social insurance and public welfare that encourages an extension of the process of job search and it is an artifact of the language that uses a term which in everyday parlance means forced idleness for activities that have important productive functions akin to the functions of inventories information processing and investment associated with the utilization of capital goods these interpretations to be sure hardly constitute a consensus about the meaning of unemployment but they are no more diverse than the range of views that underlay the older orthodoxy and for policy makers and economic researchers they carry a single message there are many more serious problems toward which to direct attention these new views about unemployment were developed out of a set of ideas originally associated with the chicago school of economics where the emphasis at once positive and normative was placed on the competitive market as the gover a review of alexander keyssar out of work the first century of unemployment in massachusetts cambridge cambridge university press 1986 and robert salais nicolas baverez and b6nedicte reynaud l invention du chomage histoire et transformations d une categorie en france des annees 1890 aux annees 1980 paris presses universitaires de france 1986

accommodation price flexibility and fluctuations abstract we show that in an economy where output fluctuations are driven primarily by aggregate demand shocks allowing a contemporaneous response of nominal wage contracts to actual market conditions in the period of the reopening of a contract invalidates taylor s second order phillips curve and delong and summers destabilizing output effects of increased price flexibility

electricity sector reform in cameroon is privatization the solution abstract the economic difficulties of cameroon and of its government owned companies led the international monetary fund imf and the world bank to set up a vast privatization program with the government s collaboration in the electricity sector the state had a complete control over the industry through the societe national d electricite sonel an integrated monopoly utility under the imf world bank program sonel has been sold to foreign interests this article presents cameroon s electricity sector the proposed reform and the importance of electricity in economic development an evaluation of the reform is presented from two different perspectives first we consider the reform from a theoretical and market design point of view second we challenge the reform from a more fundamental level by questioning the relevance of privatization at this stage of the electricity sector development this brings us to review the strategic place of electricity in economic growth how different countries have dealt with their electricity industry in early development stage and how the objective of multinational corporations could be in conflict with specific electricity sector goals from these two different perspectives we conclude that the imf and the world bank have set up a reform process that is against good public policy we conclude with some suggestions for improving the reform process

true commitment or empty rhetoric an arima analysis of the deconcentration of public investment in peru morrison a r 1993 true commitment or empty rhetoric an arima analysis of the deconcentration of public investment in peru reg studies 27 41 52 regional policies are ubiquitous in less developed countries yet theoretical explanations for these policies are often ignored this essay presents theoretical explanations inspired by world systems analysis and more traditional marxist analysis dependency theory and neoclassical economic theory for regional policy and examines their appropriateness for the peruvian case subsequently the strength of the link between political rhetoric favouring deconcentration policies and the reality of such policies is examined have successive governments kept their promises to distribute public investment more equitably over peruvian regions this question is addressed with the aid of arima models which allow the effect of policy interventions to be gauged in straightforward fashion the arima analysis reveals that few governments have matched their regionalist rhe

price level uncertainty and instability in the united kingdom abstract was uk inflation more stable and or less uncertain before 1914 or after 1945 we address these questions by estimating a statistical model with changing volatilities in transient and persistent components of inflation three conclusions emerge first since periods of high and low volatility occur in both eras neither features uniformly greater stability or lower uncertainty when comparing peaks with peaks and troughs with troughs however we find clear evidence that the price level was more stable before world war i we also find some evidence for lower uncertainty at pre 1914 troughs but its statistical significance is borderline

is increased price flexibility stabilizing this paper uses john taylor s model of overlapping contracts to show that increased wage and price flexibility can easily be destabilizing because of the mundell effect while lower prices increase output the expectation of falling prices decreases output simulations based on realistic parameter values suggest that increases in price flexibility might well increase the cyclical variability of output in the united states copyright 1986 by american economic association

price flexibility and aggregate stability some evidence contrasting developing and developed countries this paper explores the empirical validity of theoretical channels through which price flexibility may have caused differences in the stability of output in developing and developed countries the relation between these two variables suggests several principles where the size of stochastic disturbances that impinge on the economic system does not play an important role in determining the degree of price flexibility the increased flexibility is clearly stabilizing developing countries generally are characterized by larger stochastic disturbances and a higher flexibility of the price level than developed countries the larger variability of disturbances is indeed destabilizing further this destabilizing effect has domi nated the stabilizing effect that is associated with the increased flexibility of the price level in developing countries and this results in a clear positive correlation between price flexibility and output variability

unions and the financial performance of british private sector establishments summary this paper considers the relationship between unions and financial performance using data from the 1980 and 1984 workplace industrial relations surveys a qualitative indicator of financial performance is utilized and ordered probit estimates presented these indicate that unionized establishments are characterized by lower performance levels than are non union concerns the interface between union effects and relative market power is also explored and the ability of unions to extract a share of the available rents is found to be greater if the plants in which they are located possess a higher market share

the asymmetric stabilizing effects of price flexibility historical evidence and implications the evidence of business cycles across a sample of industrial countries indicates asymmetry in the output and price adjustments to aggregate demand shocks in the pre and post war periods upward price flexibility is significant in moderating output fluctuations across countries in the pre and post war periods nonetheless the effect of upward price flexibility in accelerating trend price inflation is more evident across countries in the post war period compared to the pre war period the combined evidence is consistent with a steeper supply curve in the face of expansionary demand shocks that increases the stabilizing effect of upward price flexibility in contrast a flatter supply curve in the face of negative demand shocks has countered the stabilizing function of downward price flexibility which appears insignificant across countries in the pre and post war periods in addition a slower demand response to price change during recessions has further reinforced the contractionary effect on output d

is price flexibility stabilizing a broader perspective recent prewar postwar comparisons of united states macroeconomic performance have produced a number of stylized facts about differences in the cyclical behavior of real activity and prices across the two periods 1 among them are two that have attracted special attention the stability of real aggregate activity measured by the variance of its cyclical component has been greater in the postwar period than in the prewar period and wages and prices have been less flexible in the postwar period than in the prewar period 2 in the standard keynesian paradigms wage and price rigidity are the cause of output and employment fluctuations taken together then the observations of greater stability and reduced wage and price flexibility have puzzled some economists and prompted a reconsideration of the relationship between the flexibility of the price system and macroeconomic stability a series of recent papers3 reassesses the relationship between price flexibility and

differences in relative prices and international differences in growth rates the new growth literature following paul m romer 1986 and robert e lucas jr 1988 has formulated models in which growth rates can differ systematically across countries a large empirical literature has used cross sectional techniques to examine the cause of international differences in growth rates this paper examines whether this work has used data which have been constructed in such a way as to introduce inadvertently a spurious correlation between growth and income levels this effect occurs because relative prices evolve because of different rates of technological progress in different industries many of the new growth models assume single goods or goods produced by the same technology so this phenomenon has so far escaped analysis if technological progress is more rapid in some sectors than others relative prices will change during the process of development the change of relative prices has two effects on measured growth rates first the choice of base prices affects the growth rate this phenomenon is sometimes called the gerschenkron effect second using any base prices or weights introduces a spurious correlation between income and growth less developed countries would tend to have lower growth rates not because they grew more slowly but because of data construction techniques for the sake of simplicity these phenomena will be called the gerschenkron or the level effect and the spurious correlation effect 3 this paper examines the international comparison program icp and the penn world tables pwt which are based on the icp the penn world tables are the data most widely used in empirical studies of international differences in economic growth both the icp and pwt use international prices to adjust for differences in the purchasing power of currencies these prices most closely resemble hungarian prices using such prices tends to produce time series with lower growth rates than those in the national accounts for countries less developed than hungary conversely the growth rates would be higher for countries more developed than hungary however the growth rates of poorer countries are not systematically lower in the penn world tables the paper examines why the growth rates are not distorted and makes some specific recommendations for data construction and use virginia polytechnic institute and state university blacksburg va 24061 0316 part of this work was supported by a grant from the institute of international studies at brown university and by a summer internship at the division of international finance at the federal reserve board i am grateful to peter garber david weil oded galor and anonymous referees for helpful comments alan heston and robert summers have also helped me understand icp and pwt methodology of course i alone am responsible for any mistakes in this paper iexamples include steve dowrick and duc tho nguyen 1989 robert j barro 1991 j bradford de long and lawrence h summers 1991 and n gregory mankiw et al 1992 2a series of papers by christina d romer 1986a b 1989 has already emphasized the importance of data construction techniques in another context 3there is a third effect a real acceleration effect caused by shifting consumption patterns and the reallocation of resources between sectors growth accountants such as angus maddison 1987 adjust estimates of total factor productivity for this sort of shift william j baumol et al 1989 have also referred to this phenomenon for an analysis in terms of a simple multisector solow model see nuxoll 1992a

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

effect of the number of banking relationships on credit availability evidence from panel data of spanish small firms this paper investigates how the choice between single or multiple banking relationships affects credit availability for a complete panel of small and medium sized spanish firms the results seem to indicate the existence of rationing since a substitution relation has been found between trade and bank credit we also analyse the relationship between the level of indebtedness and the interest rate for each group of firms the results show that those smes that work with fewer financial intermediaries obtain fewer funds for the same increase in the interest rate which indicates that these companies have more financial restraints

price flexiblity and output volatility the case for flexible exchange rates abstract this paper uses descriptive statistics and regression analyses to examine the relationship between exchange rate variability and output volatility in developed countries based on 1961 to 1984 data the result indicate that a flexible exchange rate system is associated with less not more dispersion in output growth across industrialized countries despite a more turbulent global environment also countries which have more exchange rate volatility experience less output volatility the relationship appears not to be spurious the results are consistent with the idea that an increase in price flexibility does not destabilize output