Research Database

A quantitative investigation of investment-specific technological change for the U.S. postwar period is undertaken, analyzing both long-term growth and business cycles within the same framework. The premise is that the introduction of new, more efficient capital goods is an important source of productivity change, and an attempt is made to disentangle its effects from the more traditional Hicks-neutral form of technological progress. The balanced growth path for the model is characterized and calibrated to U.S. National Income and Product Account data. The long- and short-run U.S. data are then interpreted through the eyes of this framework. The analysis suggests that investment-specific change accounts for a large part of U.S. growth and is a significant factor in U.S. business cycle fluctuations.

The Great Depression in the United States was largely the result of changes in economic institutions that lowered the normal or steady-state market hours per person over 16. The difference in steady-state hours in 1929 and 1939 is over 20 percent. This is a large number, but differences of this size currently exist across the rich industrial countries. The somewhat depressed Japanese economy of the 1990s could very well be the result of workweek length constraints that were adopted in the early 1990s. These constraints lowered steady-state market hours. The failure of the Japanese people to display concern with the performance of their economy suggests that this reduction is what the Japanese people wanted. This is in sharp contrast with the United States in the 1930s when the American people wanted to work more.

In this paper we study the dynamic behavior of stock returns and volatility in emerging financial markets. In particular, we focus our attention on the following questions:

o Does stock return volatility in emerging markets change over time? If so, are volatility changes predictable?

o How frequent are big surprises in emerging stock markets?

o Is there any relationship between market risk and expected returns?

o Has liberalization affected return volatility in emerging financial markets?

Our findings can be summarized as follows. First, there is strong evidence of predictable time-varying volatility in almost all countries. In general, changes in volatility are highly persistent. Second, a fat-tailed distribution improves the fitting ability of the model. Third, investors are not rewarded for market-wide risk. Finally, we do not find any systematic effect of liberalization on stock market volatility.