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Most analyses of the U.S. Great Moderation have been based on VAR methods , and have consistently pointed toward good luck as the main explanation for the greater macroeconomic stability of recent years. Using data generated by a New-Keynesian model in which the only source of change is the move from passive to active monetary policy, we show that VARs may(More)
There is a rich scholarly literature on sovereign default on external debt. Comparatively little is known about sovereign default on domestic debt. Even today, crosscountry data on domestic public debt remains curiously exotic, particularly prior to the 1980s. We have filled this gap in the literature by compiling a database on central government public(More)
As relative rewards that different professions receive are a key factor in the allocation of talent, what determines the reward structure of a society is an important question. This paper develops an equilibrium model of the allocation of talent between productive and unproductive activities (such as rent-seeking). The existence of rent-seeking creates a(More)
We use a panel of 16 OECD countries over several decades to investigate the effects of government debts and deficits on long-term interest rates. In simple static specifications, a one-percentage-point increase in the primary deficit relative to GDP increases contempora-neous long-term interest rates by about 10 basis points. In a vector autoregression(More)
Theoretical models of growth and trade suggest that patterns of international specialisation are inherently dynamic and evolve endoge-nously over time. Initial comparative advantages are either reinforced or gradually unwound with the passage of time. This paper puts forward an empirical framework to evaluate the dynamics of international trade patterns,(More)
Several studies have documented a negative relationship between democracy and volatility. The latter is usually measured at high frequency – as the standard deviation of annual GDP growth rates. On the other hand, growth researchers have recently focused on the medium term and documented frequent shifts in the trend-growth process within countries. In this(More)
This article reformulates two important ideas from KeynesÕs General Theory. The first is that there may be a continuum of steady-state unemployment rates. The second is that beliefs select an equilibrium. I argue that search and matching costs in the labour market lead to the existence of a continuum of equilibria and I resolve the resulting indeterminacy(More)
for useful discussions. We are also grateful for comments from Abstract Our objective is to identify the trading strategy that would allow an investor to take advantage of " excessive " stock price volatility and " sentiment " fluctuations. We construct a general-equilibrium model of sentiment. In it, there are two classes of agents and stock prices are(More)
This paper evaluates VAR models designed to analyze the monetary policy transmission mechanism in the United States by considering three issues: speci…cation, identi…cation, and the e¤ect of the omission of the long-term interest rate. Speci…cation analysis suggests that only VAR models estimated on a single monetary regime feature parameters stability and(More)
We investigate theoretically and empirically the competitive effects of increased trade on prices, productivity and markups. Using disaggregated data for EU manufacturing over the period 1988-2000 we Þnd increased openness exerts a negative and signiÞcant impact on sectoral prices. Increased openness lowers prices by both reducing markups and raising(More)