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Creator: Backus, David and Kehoe, Patrick J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 348 Abstract:
We derive the empirical implications of a popular class of international macroeconomic models. The real economy is a stochastic exchange model with complete markets. A standard result is that cross-country risk sharing implies perfect correlation between consumption paths across countries. With mild restrictions on the endowment process ii also implies a positive correlation between net exports and output in every country. We introduce money using cash-in-advance constraints and show that the implications for real variables carry over into the monetary economy. These dichotomy and neutrality propositions generalize those in the literature to stochastic environments with heterogeneous agents, and do not require the cash-in-advance constraint to bind in every state. They imply that any correlation between the nominal exchange rate and the balance of trade can be made consistent with the theory.
Mot-clé: Cash-in-advance, Government finance, Risk-sharing, Monetary policy, and Exchange rates Assujettir: F30 - International Finance: General, D46 - Value Theory, and E32 - Business Fluctuations; Cycles
Creator: Perri, Fabrizio and Quadrini, Vincenzo Series: Great depressions of the twentieth century Abstract:
We analyze the Italian economy in the interwar years. In Italy, as in many other countries, the years immmediately after 1929 were characterized by a major slowdown in economic activity as non farm output declined almost 12. We argue that the slowdown cannot be explained solely by productivity shocks and that other factors must have contributed to the depth and duration of the the 1929 crisis. We present a model in which trade restrictions together with wage rigidities produce a slowdown in economic activity that is consistent with the one observed in the data. The model is also consistent with evidence from sectorial disaggregated data. Our model predicts that trade restrictions can account for about 3/4 of the observed slowdown while wage rigidity (monetary shocks) can account for the remaining fourth.
Mot-clé: Wage rigidity, Italy, Depressions, and Trade restrictions Assujettir: N14 - Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: Europe: 1913- and E32 - Business Fluctuations; Cycles
Creator: Geweke, John Series: New methods in business cycle research Abstract:
A simple stochastic model of the firm is constructed in which a dynamic monopolist who maximizes a discounted profits stream subject to labor adjustment costs and given factor prices sets output price as a distributed lag of past wages and input prices. If the observed relation of wages and prices in manufacturing arises solely from this behavior then wages and input prices are exogenous with respect to output prices. In tests using quarterly and monthly series for the straight time wage, an index of raw materials prices and the wholesale price index for manufacturing and its durable and nondurable subsectors this hypothesis cannot be refuted for the period 1955:1 to 1971:11. During the period 1926:1 to 1940:11, however, symmetrically opposite behavior is observed manufacturing wholesale prices are exogenous with respect to the wage rate, a relation which can arise if dynamically monopsonistic firms compete in product markets. Neither structural relation has withstood direct wage and price controls.
Mot-clé: Wholesale, Labor, Wages, Prices, and Manufacturing Assujettir: E32 - Business Fluctuations; Cycles, E31 - Price Level; Inflation; Deflation, and L60 - Industry Studies: Manufacturing: General
Creator: Christiano, Lawrence J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 339 Mot-clé: Fluctuations, Investment, Inventory investments, and Inventory Assujettir: G31 - Capital Budgeting; Fixed Investment and Inventory Studies; Capacity and E32 - Business Fluctuations; Cycles