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Positive Feedback Investment Strategies and Destabilizing Rational Speculation
Analyses of the role of rational speculators in financial markets usually presume that such investors dampen price fluctuations by trading against liquidity or noise traders. This conclusion does not… Expand
Equipment Investment and Economic Growth
Using data from the United Nations Comparison Project and the Penn World Table, we find that machinery and equipment investment has a strong association with growth: over l9&)?l95 each percent of GDP… Expand
Mean Reversion in Stock Prices: Evidence and Implications
This paper analyzes the statistical evidence bearing on whether transitory components account for a large fraction of the variance in common stock returns. The first part treats methodological issues… Expand
A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment
This paper develops a model of dual labor markets based on employers' need to motivate workers. In order to elicit effort from their workers, employers may find it optimal to pay more than the going… Expand
The Survival of Noise Traders in Financial Markets
We use the revised estimates of U.S. GNP constructed by Christina Romer (1989) to assess the time-series properties of U.S. output per capita over the past century. We reject at conventional… Expand
The Changing Cyclical Variability of Economic Activity in the United States
This paper examines the changing cyclical variability of economic activity in the United States. It first shows that the decline in variability since World War II cannot be explained by changes in… Expand
Is Increased Price Flexibility Stabilizing?
This paper uses Taylor's model of overlapping contracts to show that increased wage and price flexibility can easily be destabilizing. This result arises because of the Mundell effect. While lower… Expand
The Size and Incidence of the Losses from Noise Trading
Recent empirical research has identified a significant amount of volatility in stock prices that cannot be easily explained by changes in fundamentals; one interpretation is that asset prices respond… Expand
Tax Policy, Asset Prices, and Growth: a General Equilibrium Analysis
This paper presents a multisector general equilibrium model that is capable of providing integrated assessments of the economy's short- and long- run responses to tax policy changes. The model… Expand
Why Have Private Saving Rates in the United States and Canada Diverged?
One of the central questions in macroeconomics for many years has been whether government policy can affect private saving rates, and if so to what extent and through what channels. The question has… Expand