#2008-022A "Enlargement and Common External Tariff in a Political-Economic Model of Customs Union"
by Subhayu Bandyopadhyay, Sajal Lahiri, and Suryadipta Roy
June 2008

We present a model with three blocks of nations: two of the blocks are members of a Customs Union (CU) and maintain a common external tariff (CET) on the third (non member). More...

#2008-021A "Institutional Causes of Macroeconomic Volatility"
by Levon Barseghyan, and Riccardo DiCecio
June 2008

In this paper we investigate the relation between the quality of institutions and macroeconomic volatility. Using instrumental variable regressions, we show that higher barriers to entry lead to higher volatility. More...

#2008-020A "Institutions and Government Growth: A Comparison of the 1890s and the 1930s"
by Thomas A. Garrett, and Russell M. Rhine
June 2008

Statistics on the size and growth of the U.S. federal government, along with the rhetoric of President Franklin Roosevelt, seem to indicate that the Great Depression was the event that started the dramatic growth in government spending and intervention in the private sector that has continued to the present day. More...

#2008-019A "Oil Crisis, Energy-Saving Technological Change and the Stock Market Crash of 1973-74"
by Sami Alpanda, and Adrian Peralta-Alva
June 2008

The market value of U.S. corporations was nearly halved following the oil crisis of October 1973. Real energy prices more than doubled by the end of the decade, increasing energy costs and spurring innovation in energy-saving technologies by corporations. This paper uses a neo-classical growth model to quantify the impact of the increase in energy prices on the market value of U.S. corporations. More...

#2008-018A "Real Interest Rate Persistence: Evidence and Implications"
by Christopher J. Neely, and David E. Rapach
June 2008

The real interest rate plays a central role in many important financial and macroeconomic models, including the consumption-based asset pricing model, neoclassical growth model, and models of the monetary transmission mechanism. We selectively survey the empirical literature that examines the time-series properties of real interest rates. More...

#2008-017A "A Macroeconomic Analysis of Obesity"
by Pere Gomis-Porqueras, and Adrian Peralta-Alva
June 2008

This paper tries to understand the underlying causes of the rapid increase in obesity rates over recent decades. In particular, we propose a dynamic general equilibrium model to derive the quantitative implications of a decline in the relative (monetary and time) cost of food prepared away from home on the caloric intake of the average American adult over the last forty years. More...

#2008-016A "Local Price Variation and Labor Supply Behavior"
by Dan Black, Natalia Kolesnikova, and Lowell J. Taylor
June 2008

In standard economic theory, labor supply decisions depend on the complete set of prices: the wage and the prices of relevant consumption goods. Nonetheless, most of theoretical and empirical work ignores prices other than wages when studying labor supply. The question we address in this paper is whether the common practice of ignoring local price variation in labor supply studies is as innocuous as has generally been assumed. More...

#2008-015A "Optimal Monetary and Fiscal Policies in a Search Theoretic Model of Monetary Exchange"
by Pere Gomis-Porqueras, and Adrian Peralta-Alva
June 2008

In this paper we study optimal monetary and fiscal policies, and the welfare costs of inflation, within the Lagos and Wright (2005) framework. Monetary equilibria may be inefficient without fiscal policy tools due to bargaining frictions. We show that subsidies in decentralized markets can be implemented to alleviate underproduction, while money is still essential. More...

#2008-014B "Excessive Demand and Boom-Bust Cycles"
by Patrick A. Pintus, and Yi Wen
June 2008
Revised June 2008

It has long been argued in the history of economic thought that boom-bust business cycles may be driven by over-investment (Tugan-Baranovsky, 1894; and Wicksell, 1906). But how is it possible to sustain over-investment without excessive savings? More...

#2008-013C "Why Money Growth Determines Inflation in the Long Run: Answering the Woodford Critique"
by Edward Nelson
May 2008
Revised August 2008

Woodford (2007) argues that it is not appropriate to regard inflation in the steady state of New Keynesian models as determined by steady-state money growth. Woodford instead argues that the intercept term in the monetary authority’s interest-rate policy rule determines steady-state inflation. In this paper, I offer an alternative interpretation of steady-state behavior, according to which it is appropriate to regard steady-state inflation as determined by steady-state money growth. More...