Economic Inquiry

Articles from Vol. 49, No. 1, January

A Finance Approach to Estimating Consumption Parameters
I. INTRODUCTION The idea of holding a portfolio rather than a single asset has been the focus of financial theory since its introduction by Markowitz in 1952. This Noble Prize-winning idea has been largely ignored in basic macroeconomic thinking...
A Macroeconomic Model on the Quality of Government and Economic Performance
I. INTRODUCTION The empirical analysis of Hall and Jones (1999) suggests that the fundamental determinant of a country's economic performance is its social infrastructure--the institutions and government policies that provide incentives for individuals....
Are Investment Expectations Rational, Adaptive or Regressive?
I. INTRODUCTION Tests of the rational expectations hypothesis (REH) outside the experimental laboratory typically utilize two types of data: quantitative measures of expectations about publicly observed variables such as inflation, usually elicited...
Boon or Burden? the Effect of Private Sector Debt on the Risk of Sovereign Default in Developing Countries
I. INTRODUCTION The past two decades witnessed a strong increase in private foreign borrowing in emerging markets and developing countries. Although in 1990 the private sector accounted for a mere 16% of all external loans disbursed to developing...
Climbing to the Top? Foreign Direct Investment and Property Rights
I. INTRODUCTION The impact of foreign direct investment (FDI) on host countries is a well-researched topic and the bulk of the literature focuses on the impact of FDI on economic growth. However, with the rapid growth of FDI inflows during the 1990s...
Commodity Taxation in Welfare States
I. INTRODUCTION While the nature of unemployment is diverse, a substantial part of unemployment in many developed countries, it is argued, stems from "generous" social welfare systems (Meyer 1990; Nickell and Layard 1999; and see Figure 1). (1)...
Consumer Credit, Liquidity, and the Transmission Mechanism of Monetary Policy
I. INTRODUCTION Despite calls for its obsolescence, the lending channel of the monetary transmission mechanism continues to generate interest among monetary economists. Recently, Den Haan, Sumner, and Yamashiro (2007) find the loan-supply effect...
Corruption and Growth under Weak Identification
I. INTRODUCTION The purpose of this paper is to revisit Mauro (1995) and re-examine his results as a consequence of recent research that cautions against making "traditional" types of inference in the presence of weak instruments. Early work done...
Economies of Scale in Banking, Indeterminacy, and Monetary Policy
I. INTRODUCTION There exists a large literature devoted to real indeterminacy in monetary models under various monetary policy regimes. Whether the regime targets money growth rates as proposed by McCallum (1999), nominal interest rates as proposed...
Inflation Dynamics and Subjective Expectations in the United States
I. INTRODUCTION This paper analyzes the ability of sticky-price models to explain the dynamics of U.S. inflation when using survey data as proxies for inflation expectations. Testing sticky-price models with survey expectations is attractive...
Monetary Policy and Endowment Risk in a Limited Participation Model
I. INTRODUCTION An asset market segmentation model is constructed in this paper to study the risk-sharing role of monetary policy. Economic agents face uninsurable endowment risk when there is limited asset market participation. Because an initial...
Sense and Surprise in Competitive Trade Theory 2010 WEAI Presidential Address
I. INTRODUCTION The competitive theory of international trade is well known for its abundance of "paradoxes." Perhaps the most widely known is the Leontief Paradox, associated with the rather startling results presented by Leontief (1953) that the...
The Composition of Government Expenditure: Economic Conditions and Preferences
I. INTRODUCTION There are substantial variations among countries in their tax and expenditure policies, even among developed democracies sharing similar economic and political regimes, as discussed by Tanzi (2000) and Alesina and Glaeser (2004)....
The Cyclicality of Price-Cost Margins in Banking: An Empirical Analysis of Its Determinants
I. INTRODUCTION In this paper, we study the cyclical behavior of price-cost margins in banking (calculated as the difference between the interest rate on loans and deposits), using time series quarterly data for the period 1979-2005 in the United...
The Political Economy of Intergenerational Income Mobility
I. INTRODUCTION The intergenerational elasticity of income is generally considered one of the best summary measures of the degree to which a society gives equal opportunities of success to all its members, irrespective of their family background....
The Value of Risk: Measuring the Service Output of U.S. Commercial Banks
I. INTRODUCTION Services are an increasingly important part of modern economies, both in terms of size and for their contribution to economic growth. However, the output data for many of these services is notoriously weak, and this is particularly...
What Is Happening to the Impact of Financial Deepening on Economic Growth?
I. INTRODUCTION Among the strongest elements of the modern economists' canon is that financial sector development has a significant impact on economic growth. A generation ago, economists like Goldsmith (1969) (1) and McKinnon (1973) began to draw...
What Was the Market Value of Daimler during the German Hyperinflation?
If an economic "fact" is worth citing widely in journals (e.g., Barro 2006; Voth 2003; Lee Tang, and Wong 2000; Orlean 1979; Schmolders 1975) and books (Faber 2002, p. 220; Feldman 1993, p. 606; Shulman 1980, p. 20; Fergusson 1975, p. 120; and Guttmann...
Why Cannot Poor Countries Utilize Existing Knowledge? Expansion of Firms and Human Capital Accumulation by Training
I. INTRODUCTION Current economic growth literature explains the growth of the developed countries, but lacks in explaining the stagnation of the poor countries. The notion of poverty traps was commonly used to explain the reason behind the lack...
Women Prefer Larger Governments: Growth, Structural Transformation, and Government Size
I. INTRODUCTION In developing and developed economies alike, growth of income per capita is generally accompanied by a rise in the share of government expenditure in gross domestic product (GDP), as well as an increase in the participation of women...

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