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The behavior of commodity markets has been a subject of extended controversy among economists. Much of this controversy revolves around the underlying behavior of futures prices over time. A number of researchers have concluded that there are no systematic patterns to futures price behavior while others maintain that while there may be a priori reasons justifying random behavior, the application of certain mechanical filter rules often leads to substantial profits which is indicative of nonrandom behavior. There are two objectives of this paper. First, the use of statistical tests to determine the presence of systematic behavior and the use of mechanical filters to determine whether profits can be generated will be compared and contrasted. These two approaches appear to lead to different conclusions, so it is of some importance to understand their respective limitations. Second, to provide empirical evidence on the random walk variant of the efficient market model for a very large sample of commodity contracts. It appears necessary to extend the sample in order to reach reliable conclusions. [ABSTRACT FROM AUTHOR]

The article focuses on the impact of spot rates, forward rates, and interest-rate differentials on international finance. The article develops a theory of interest-rate arbitrage within a simple Fisherian framework. The article also investigates some of the implications of Fisherian approach to international finance. A theory of interest-rate arbitrage is also developed under the assumption of perfect capital markets, and introduces the transaction costs into the analysis by recognizing the spread between buying and selling rates for foreign exchange. In the article's final section the implications of the analysis are presented.

The article outlines a framework within which the impact of interest rates on prices may be analyzed by using both Keynesian and the general theory which takes into account capital. The author considers cases in which monetary restriction does not include an increase in the interest rate such as when there is a movement of cash into goods, or there's a money creation through fiscal deficit which doesn't raise bank reserves. The article discusses cases of tight money in which the market rate of interest is raised.

The article discusses the financing of mortgages in California in 1967 using information gathered from the period of 1950 to 1965. California's growth during the period has been funded largely by investments made from "foreign funds" originating outside the state, since the state has grown faster than internal savings can fund. The use of funds from outside the state means that California has had to pay higher mortgage interest than the national average. The author predicts the mortgage and housing markets in California for 1970.

In large corporations ownership may not imply control but control does involve ownership. Top executives are option holders and shareholders. And because their holdings are substantial, the income of these executives is significantly affected by the market performance and dividends of their corporation's stock. This point is dear from Professor Lewellen's work. It was developed in the imaginative calculations that were carefully documented and judiciously tested for sensitivity in Professor Lewellen's National Bureau book and it is underscored in the present paper which adds information on wealth and investment income to the book's data on executive compensation. The point is difficult to dispute, though I do want to quibble with a few of the calculations. What can be disputed is the contention, based on this point, that "shareholders and management can be considered to share a common economic goal... " and the suggestion that this point has important implications for the theory of the firm. [ABSTRACT FROM AUTHOR]

Replies to an objection to some statistical tests of the Keynesian demand function for money. Deflated values for the money stock and for income; Belief that a 17-year weighted moving average of current and past interest rates is a good measure. [ABSTRACT FROM AUTHOR]

This article presents comments on William Gibson's article about the viability of thrift institutions in the U.S. James L. Pierce: I want to congratulate William Gibson for developing a reasonable structure for the determination of deposit flows into thrift institutions. Nonetheless, I am troubled by a few aspects of the equations underlying his simulations. First, I am puzzled about the interpretation of a double lag process. According to Gibson, stocks adjust with a distributed lag even after people finally perceive changes in interest rates. Second, I am concemed about Gibson's practice of fishing for the right length of lags and choosing different lags for different components for no reason except that they fit better. Finally, the variables for interest rates on thrift deposits present a peculiar problem. Since the innovation of certificates, the average interest rate paid by a thrift institution depends on the mixture of its deposits in the passbook and the certificate forms as well as the maturity of its certificates. One of the more important, if less surprising, substantive findings in Gibson's paper is that raising interest rates is the most costly way for thrift institutions to adjust to the problems created by tight money. That helps explain why the institutions want the govemment to maintain ceilings on interest rates and thus to head off competitive pressures on them to make that costly adjustment.

This article presents response from the author to comments on his article "Financial Lease Evaluation Under Conditions of Uncertainty," published in the July 1973 issue of the journal "The Accounting Review." It is a generally accepted financial practice to separate the investment decision from the financing decision and not to attribute the cost of a particular financing instrument to a particular project. Lease analysis usually starts with the viewpoint that the asset to be leased has already been accepted as a desirable investment, this follows from the precept that investing should be separated from financing. The method the author had proposed in his article followed this practice and treated leasing as a financial decision, measurable by an interest rate implicit in the lease. The model is correct and consistent with the way financing decisions are measured. There are problems in using the model which stem from considering lease analysis as a purely financing decision, and there are also problems in considering leasing as an investment decision.

Se presentan noticias que tratan de la economía de los Estados Unidos. Se informa que continuaba la expansión económica. Aumentaba la tasa de redescuento. El Presidente Eisenhower pidió al Congreso que se aumentara la tasa de interés sobre los bonos gubernamentales. Se disminuían las reservas de oro. El Congreso presionaba para que se redujera el programa de ayuda militar.

The 1961 congress enacted a housing program designed to improve living conditons by encouraging the construction or substantial rehabilitation of housing for low and moderate income families through subsidised interest rates. Under section 236 the banks provide the mortgage funds at the market interest rates with the tenants paying the portion equivalent to a one percent mortgage and the federal government the remainder. Although normative economics suggests that the welfare of the families residing in subsidized housing would be better served by a direct income transfer, the political system seems inclined to enact categorical approaches to the problem of poverty. Two major factors governed the selection of the test area. First, a largely white mid class neighborhood was important to the research objective of evaluating the reasonableness of this group's objections to the location of BMIR housing in their neighborhoods because of alleged adverse impact on their property value. Second, the housing market takes time to adjust to changes in the demand for housing services.

This article focuses on the wide variety and still changing tax treatment of capital gains and losses in the U.S. and other countries. The major objections offered to taxing capital gains as ordinary income are: they do not constitute income in a valid economic sense; many of them are illusory, reflecting only changes in price levels or interest rates that leave the real income of the investor unchanged; since the gains an investor realizes in one year characteristically have arisen over a longer period, it is unfair to tax them in full at progressive rates in the year of realization; and substantial taxes on capital gains have various undesirable practical effects upon the mobility of capital assets, incentives to invest, stability of the securities markets,and stability of government revenues. Capital gains and losses, it is contended, are not valid elements of true income, as that term is widely used. The traditional concept of income includes only more or less regular and recurring receipts, or, in any event, only those that are more or less expected. An occasional, sporadic gain or loss, especially if Unsought and unexpected, does not function like income in guiding conduct or in determining the allocation of economic resources.

The preceding discussion leads to these conclusions: 1. That in a dynamic world a change in the (short-term) interest rate will not affect the calculations of a trader (or a manufacturer) in such a way as to induce him to reduce or increase his inventory holdings; 2. That a change in the (long-term) interest rate is not likely to influence investment decisions in manufacturing industry; 3. That, under certain circumstances, a change in the (long-term) interest rate may affect investment decisions in the area of public utilities (including railroads) and residential construction; and 4. That, under certain conditions, the level of the interest rate affects the readiness of financial institutions to grant credit or to float bonds and stocks, so that the interest rate may influence the volume of investment even without changing the profit calculations of entrepreneurs. Interest rates have remained approximately stable for more than a decade. It seems that the Treasury is intent on keeping them at their present level indefinitely. Whether such a policy is possible in the long run cannot be decided here. If it is, this article may be no more than a necrologue. [ABSTRACT FROM AUTHOR]

The article presents discussions on the future of interest rates focusing on the situation during the war, and postwar. According to economist Harold E. Aul, on the basis of economic factors alone, an upward trend of short-term interest rates during the course of the war can be predicted with confidence. The rise, however, will be slow and gradual in view of the present large volume of idle funds and the vast powers of monetary management now vested in the government. The distribution of government bonds is altogether too big to be absorbed by institutional and individual savings. Compared to government needs, the slack of investment funds of insurance companies is small, for example, they have only about 1.25 billions of dollars in cash. If there is a five-year war, long-term government bond yields will probably go up to 3 to 31/2 per cent. It has been suggested that individual savings be channeled into insurance as an anti-inflation device, since excess purchasing power would thus be diverted from consumers goods.

Prior to the present decade, the deficiencies of the financial system gave rise to uneconomical lending terms and to excessive rates of interest on home loans. The pronounced and continued upward sweep of the secular trend during the twenties deferred the inevitable consequences, but the ensuing crisis brought the shortcomings into sharp focus. The repercussions were national in scope and set into action various measures of reform to give relief to home owners. This paper presents a summary of the activities of the Federal Home Loan Bank System, the Home Owners' Loan Corporation, the Federal Savings and Loan System, and the Federal Housing Administration. The influence of these agencies on interest rates is discussed, followed by an analysis of the justification of the existing rate level. It is shown that present rates are no longer the result of free market activity but are governed primarily by the rate established on FHA insured loans. There is now some question of the adequacy of rates to cover the attending costs of home-financing institutions. [ABSTRACT FROM AUTHOR]

The article discusses the views of Professor John B. Canning regarding the rate of interest. Professor Canning took as his subject, certain supposed interdependences of business expectations, the rate of interest and fluctuations of investment. He proposed, as theses to be examined rather than as assertions, two propositions that recur frequently in the writings of economists. These were investment or fluctuations of investment which depends on business expectations, and the rate of interest plays significant roles in determining fluctuations of investment. He did not deny that interest rates may have some positive influence on fluctuations of investment nor that disregard of interest rates may have disastrous consequences. According to Professor Canning, both in traditional and current writings in theory, interest rates are supposed to affect fluctuations of investment in a variety of ways. Professor Canning selected for comment: the influence of current rates on current decisions to install new capital goods; and the influence of changes in rates upon the successive revaluations of goods used in production.

Despite the fact that bank notes or deposits are used in the daily business of hundreds of millions of people, there still remain numerous misconceptions concerning the nature of these media of exchange. Bank credit is used mainly for business purposes. Some loans from banks are obtained in order to purchase consumption goods, but loans for this purpose form so small a fraction of the total that they scarcely need consideration here. The bulk of credit loaned, not only by banks, but by other lenders as well, is nowadays borrowed for purposes of investment or for use in undertakings for profit making. Business concerns are also hampered by the fact that loans fall due and the principal must then be paid. Normally, it is not difficult simply to sell a new set of notes or bonds, paying off the old debt with the proceeds; but, if the debt falls due during a period of financial stringency, it may be necessary to pay higher interest rates on the new loan and, in some cases, it is almost impossible to secure an extension of credit at any price.

This paper treats the following problem. How much money should be invested at time to at an interest rate of I for a time T such that the probability of the funds required "K(T)" exceeding those available "X(T)" equals at most p. That is P{K(T) > X(T)} ≤ p, where X(T) = X(t0) exp {I(T - t0)}. The parameters I, T, X(T) and K(T) are taken to be random variables. The theory to solve the stated problem is presented and solutions to certain specific cases are given. [ABSTRACT FROM AUTHOR]

In a recent paper economist Jan Mossin attempts to isolate the class of utility functions of terminal wealth, f(x), which, in the sequential portfolio problem, induces myopic utility functions of intermediate wealth positions. Induced utility functions of short-run wealth are said to be myopic whenever they are independent of yields beyond the current period; that is, they are positive linear transformations of f(x). Mossin concludes (1) that the logarithmic function and the power functions induce completely myopic utility functions; (2) that, when the interest rate in each period is zero, all terminal wealth functions such that the risk tolerance index is linear in x induce completely myopic utility functions of short-run wealth; (3) that, when interest rates are not zero, the last class of terminal wealth functions induces partially myopic utility functions. The purpose of this article is to show that the second and third statements are true only in a highly restricted sense even when yields are serially independent, and that, when investment yields in the various periods are statistically dependent, only the logarithmic function induces utility functions of short-run wealth which are myopic.

Recently, confidence in the Expectations Hypothesis, which states that the shape of the structure of interest rates is determined by the actions of speculators in such a way that long-term and short-term securities are good substitutes for one another, has been weakened with reference to the British experience. These contradictions, both empirical and theoretical, have even cast doubt on earlier test results obtained by David Meiselman on the American data. In this article an alternative set of findings using the British data will be presented. These findings are broadly consistent with the results Meiselman obtained; they support the Expectations Hypothesis in a modified version—modified, that is, to account for hedging effects. In order to effect a careful test of the various hypotheses concerning the determination of relative interest rates, this article will discuss various other matters. In the first place, the theory of the term structure of interest rates is reorganized in a way designed to clarify matters often discussed in the literature; one of the results is a more convenient derivation of the Hicks formula for forward interest rates. In the second place, an improved technique (that of multiple regression) for constructing yield curves is described and utilized; this technique offers, among other advantages, a method whereby extraneous factors can be appraised and, if necessary, controlled. Lastly, some reference is made to matters of relevance to recent discussion of British monetary policy; particular emphasis is placed on the role of the British Monetary Authority with respect to the term structure of interest rates. [ABSTRACT FROM AUTHOR]

Loansharking has become a major source of revenue for the underworld and a major route by which crime syndicates have infiltrated legitimate businesses. When taken over by the loansharks, these businesses are used to further other criminal enterprises. Since ancient times the moneylender has played a significant role in society. His sharp practices and hard heart have been highlighted in literature. The borrower who is in some kind of financial difficulty is not too different from his counterpart of other eras. The pressure on the borrower to obtain a loan often means he cannot quibble over terms. This being the case, the moneylender is in a position to make the most of such a situation. Loansharking is the lending of money at higher rates than the legally prescribed limit. After gambling, loansharking is the second highest source of revenue for organized crime. Gambling profits often provide the initial capital for loanshark operations. This study is designed to investigate the historical background of usury through the ages, its contemporary status in the U.S., including a case study of a loanshark operation, the business of loansharking, its source of funds, interest rates, business volume, and major areas of operation.

This article presents a model of a short-run behavior of commercial banking in the U.S. There have been studies of bank borrowing from the Federal Reserve, of bank behavior regarding free reserves, and of bank adjustments in their excess reserves and earning assets portfolio. A principal presumption of this study is that the individual bank seeks to handle its adjustment gap in such a manner as to maximize returns from its short-run adjustment position. Finally, the model as specified rests on an additive utility function, with no account being taken of interaction among variables.

The article investigates two models of borrowing for investment purposes. The first model called fixed-sized investment where there is a specified amount which must be invested, neither more nor less being allowed. This model presents the expected profit on a loan as a function of the interest rate offered, the size of the loan and the parameters of the investment opportunity. The second one is known as open-end investment, in which, any amount may be invested with returns to scale. With this model, the profit maximizing loan increases indefinitely with the rate of interest.

MY PURPOSE is to analyze the relevance of recent empirical research on the term structure of interest rates in choosing among competing theories of the determinants of the term structure. In particular, two theories have been the subject of serious consideration. The first, known as the expectations theory, asserts that spot interest rates of loans of different maturities depend solely on market expectations of future interest rates. The current term structure forecasts the later term structure. The rival theory, known as the liquidity preference theory, denies that the current term structure provides unbiased forecasts of subsequent interest rates. Adherents of this theory claim that the risk aversion of lenders makes them value the stability of principal more than the stability of income. Principal is impaired if there is an unforeseen rise in interest rates while the stability of income is reduced from a policy of successively lending a given principal for short time periods. Supporters of the liquidity premium theory conclude that as a result long-term interest rates normally exceed short-term rates. Therefore, forecasts of future rates embodied in the present term structure systematically overestimate the spot rates that materialize. It should be noted that this form of risk has nothing to do with the chance of borrowers' default; liquidity preference would exist even if bonds were guaranteed against default. [ABSTRACT FROM AUTHOR]

The article addresses the impact of higher short-term interest rates on domestic activity in the U.S. The author points out that an increase in the short-term rate of interest should both encourage foreign short-term funds to flow into the country and discourage domestically owned funds from being placed abroad. He adds that an inflow of short-term foreign funds will not affect the recorded deficit but will ease pressure on official holdings of international liquid asset. He also provides an overview of short-term liabilities to foreigners reported by banks in the U.S.

This article presents information regarding a tax cut to avert stagflation. In times past, higher unemployment rates usually accompanied falling prices. Now one seems caught in the web of rising unemployment mid rising prices. What once appeared a contradiction in terms is revealed as the ubiquitous reality tormenting U.S.' own affluent society and many others. This largely unprecedented phenomenon should hasten a revision of the country's stabilization strategy. Old measures will not suffice to cope with new events. The Federal Reserve's intentions are noble, but its control paraphernalia are blunt unless circumstances are unduly propitious., its exertions will generate stagflation, nonoptimal in both price level and employment. Evidence of its ineffectualness is cumulating. Those who prescribe even greater monetary stringency threaten a pernicious cure they would widen unemployment without diverting the price trend. The 1974 forecasts of almost no growth in the first part of the year and slow growth thereafter, with unemployment averaging 5.5 percent or mote, are predicated largely on the impact of tight money and high interest rates, which will cut housing and business construction.

There are three relatively simple methods in common use for determining the rate of interest in installment payment plans. These are known as the Constant Ratio, Series of Payments and Interest at End methods. They have been developed from independent assumption, apparently without any thought that they might be approximations to the more complicated Compound Interest method. In a paper in the American Mathematical Monthly it is shown algebraically that the above methods are approximations to the Compound Interest Method. In order to obtain a better understanding, let us assume temporarily that we know the rate and form a schedule of the payment of the debt. The magnitudes of the rates for the approximate formulas may be compared by means of the areas of the trapezoids. The rate is inversely proportional to the area. The areas for the series of payments, constant ratio, and interest at end methods are in order. This solution is often approximated by means of interpolation in tables. It is the purpose however to compare the compound interest method with the above methods and to present a simple but more accurate approximate formula which can be used without knowledge of the theory of finance.

This article presents a model of life cycle saving based on the Yaari-Tobin result by incorporating uncertainty concerning future human incomes. The model attempts to interpret the observed consumption profile as one such continually revised optimal consumption profile. The optimal lifetime consumption plan generated by this model keeps shifting up and down with age among a family of parallel curves each with a different intercept representing the varying assessment of future earning power but with a common slope. Under some reasonable assumptions on the utility function, uncertainty about future income is translated into a risk premium which adds to the market interest rate in discounting future income. Under the few simplifying assumptions made for an average consumer, the revised consumption profile tends to resemble the profile of his human income. While the idea of revisions in consumption plans may sound attractive, it is not quite so easy to test this hypothesis directly against empirical data. The key notion in the model of life saving based on the Yaari-Tobin result is the continued revisions in the light of changing future outlook. The key notion in the model is the continued revisions in the light of changing future outlook. For a given pattern of lifetime human income, the discounted value of future human income can be written as a function of current human income.

This article determines the proper interest rate at which individuals will be willing to loan money to the government necessarily understates the true social cost of the investment in the U.S. There is an argument for the lesser riskiness of public investment that is based on the law of large numbers. several economist including Paul Samuelson and William Vickrey have claimed that since government is able to spread its funds over a large number of investments, it can reduce the variance in the stream of income from those investments to a greater extent than can be done with the returns from private investments.

The paper is divided into two parts. In Part I, a stock adjustment model with a variable adjustment coefficient is set up to explain state and local government investment. The empirical findings are discussed in Part II. Why does a given actual interest rate cause a municipal borrower to postpone a bond sale at one time and not to postpone it at another time? The search for an answer to this question led to the hypothesis that the timing of state and local government capital outlays depends on the difference between the actual and the expected interest rate. If the interest rate prevailing at the time bonds are to be marketed is what the finance officer expected it to be, he will carry out authorized expenditures without change. But if the rate is higher than expected, he may delay the expenditure of authorized funds. Expectations change over time, providing an explanation of the different attitudes toward the same actual interest rate. This hypothesis can be formalized in a stock adjustment model in which the adjustment coefficient varies with the difference between the actual and the expected interest rate. The research findings reported in this paper flow from an attempt to use such a model to explain state and local government capital outlays for highways from 1951 through 1966.

When all the components of U.S. capital are aggregated, the substitution effects are netted out; and the interest rate variable is significant. A subsidiary question is whether the interest rate differential determines a stock or a flow. For example, if the interest rate differential determines a stock e.g., short-term dollar liabilities to private foreigners then a constant or declining basic deficit requires a growing interest differential. On the other hand, if the interest differential determines a flow, a constant basic deficit is consistent with a constant interest differential. If there were no interest differential or speculative expectations, there would tend to be an annual outflow of $159 million of U.S. short-term capital and an annual inflow of $830 million of private foreign short-term capital. The net inflow is $691 million per annum. If there is speculative pressure against the dollar such that the forward rate on the dollar is one percentage point less than predicted, there will be an outflow of $783 million of U.S. short-term capital per annum and an outflow of $990 million of private foreign short-term capital per annum.

Recent discussions of the term structure of interest rates have been tranchant and discordant. Many participants have been attracted toward unicausal explanations of the rate structure. The author first summarizes briefly some of the points made in his dissertation that bear directly on the controversy noted above. Then the author presents in as much detail as space will permit some of his empirical and theoretical work which attempts to reconcile and synthesize opposing hypotheses. He believes that emendations must be made to the expectations analysis to account for transactions costs, diversity of expectations, and institutional maturity preferences on both sides of the market. These suggest that supply levels do affect the term structure. Much more empirical work is needed to establish the degree of sensitivity of the rate structure to relative supply changes. The author says his theoretical and empirical findings on the microeconomic level leads him to believe that this sensitivity may be greater than many expectationists believe.

This article examines the principle hypotheses which have been offered to explain the relationship of short term and long term rates. The relation of short-term to long-term yields has often intrigued both economic theorists and investment analysts. This relationship, usually referred to as the structure of interest rates, has been characterized by significantly divergent patterns. Economists have typically formulated theories of the structure of interest rates in terms of bond yields to the exclusion of bond prices. An examination of these relationships alone brings us immediately to an important conclusion. Empirical investigations of the shape of the yield curve show that the curve invariably flattens out as term to maturity is extended. Historical interest rate movements would suggest, however, that such a drastic drop in the level of rates has been associated with secular rather than cyclical movements. To the extent that institutional rigidities lead to relatively greater volatility in short rates, it is not true that the activities of arbitrageurs will necessarily work in the direction of smoothing these additional yield fluctuations.

This article examines the stability of the full employment growth equilibrium. In equilibrium output is growing at a rate determined by the rate of growth in the labor supply and in the productivity of labor. When equilibrium is disturbed the following chain of events is assumed. Commodity prices rise or fall according as there is an excess demand or excess supply for goods. Because of the assumption regarding the behavior of money wages and the form of the production function, changing prices do not affect the distribution of income between wage earners and capitalists. However, the rise or fall in commodity prices gives rise to expectations as to the future rate of change in prices. This, assuming for the moment money interest rates to be given, changes the real rental of capital which in turn induces substitution between capital and labor. This substitution in its turn affects the excess demand for goods. The question we ask is whether the process will restore equilibrium. The answer, for any given expectation-formation assumption, is found to depend on a comparison of the rate at which factor substitution changes the marginal product of capital and the rate at which the real rental of capital is changing.

The article explains the objective of J. M. Culbertson's study on the interest structure in economics. The study aims to pull together a realistic theory and to apply it to the explanation of the actual interest rate behavior. The author states that the literature dealing with the theory of the rate structure, and with points that are involved in the theory of the rate structure, is large, capable, inconsistent, and in some cases self-contradictory. Reviewing of the theory in attempt to give an integrated interpretation of the terminological, methodological, and behavioral questions involved requires considerable space and implies some understood framework upon which the criticism could be based.

The article presents a comment on John Culbertson's recent article about interest structure of economics. Although current theory of the maturity structure of interest rates is incomplete, it is more acceptable body of doctrine than Culbertson's article. The author aims to set forth an interpretation of the existing theory and discuss Culbertson's theoretical treatment of expectation. The discussion of expectation refers to the influence on present rates of expected future rates and the discussion of uncertainty refers to the influence on present rates of uncertainty of future rates.

This article focuses on the theory of rate structure to trace the development of rate patterns which was prevalent during the World War II and postwar period. In essence, the theory of rate structure is an explanation of the reasons for the characteristics of the yield curve for the various maturities of securities which are comparable as to risk, tax status, etc. An acceptable theory must account for a yield curve with a slope which is either positive or negative, steep or gentle. A positively sloped curve indicates that yields are higher on the longer maturities, while a steep slope reflects a wide spread between short and long rates. A negatively inclined slope, on the other hand, describes a situation in which yields are lower on the longer maturities than on those of shorter duration; and a gentle slope is indicative of a relatively narrow spread between short and long rates. Assuming perfect forecasting of rates on the part of the market, complete shiftability among maturities for both borrowers and lenders, and the absence of any costs of investment or borrowing, the current long-term rate can be thought of as an average of future short-term rates. If the average of future short rates over a certain period of time is expected to be high relative to current short rates, current long rates on securities maturing during this expectation period will also tend to be higher than current short rates, and vice versa.

The article describes a diagrammatic method in analyzing the relationship between income variations and international balance of payments. The author makes the following assumptions on the effects of income variations to formulate his method: 1) constancy of all prices, including foreign exchange rates and interest rates 2) constancy of all propensities relating income components to income - specifically, the propensities to consume domestic goods, to import, and to invest. It is also assumed that imports consist entirely of consumption goods, in order to avoid the problem of the import content of domestic production.

This article discusses the effect of state legislation on fire insurance rates in the U.S. Although much has been written concerning the nature of the interest rate, economists have devoted relatively little attention to the structure of interest rates on securities of different maturities. In essence, the theory of rate structure is an explanation of the reasons for the characteristics of the yield curve for the various maturities of securities which are comparable as to risk, tax status, etc. An acceptable theory must account for a yield curve with a slope which is either positive or negative, steep or gentle. A positively sloped curve indicates that yields are higher on the longer maturities, while a steep slope reflects a wide spread between short and long rates. A negatively inclined slope, on the other hand, describes a situation in which yields are lower on the longer maturities than on those of shorter duration; and a gentle slope is indicative of a relatively narrow spread between short and long rates.

Are there decentralized mechanisms which automatically re-aim a competitive economy when it is headed for long-run inefficiency? This is the first question this paper will address. It is known, for example, that many competitive equilibrium paths are inefficient in heterogeneous capital models with no terminal date (Malinvaud, [I1]). Recently, Hahn [4], [5] has cast severe doubt that efficient paths are ever chosen under competition when a heterogeneous capital economy operates with myopic foresight and a simple savings rule. Even when there is just one capital good in a Ramsey planning model, the long-run efficient path is unstable in the space of momentary equilibrium paths: if the central planner initially chooses the right path, minor external shocks cause myopically optimizing individuals to follow permanently inefficient equilibrium paths. (Samuelson and Solow [13], Kurz [10]). All of these models restrict attention to momentary equilibrium paths, viz., those paths which have savings equal investment, and labour fully employed at each moment of time. In a competitive economy it seems more reasonable to suppose that each individual agent maximizes his gains on the basis of his expectations about future prices and incomes. But this means that, except by chance, the economy will not be in momentary equilibrium, and so people's reaction to market disequilibrium must be specified. Once this is done, one can ask whether the economy is stable i.e., whether the presence of disequilibrium sets up forces which inexorably lead the economy to an equilibrium path. This is the second question we shall investigate here.In the model presented here, household saving (or supply of capital) is explained by the maximization of a single, infinite horizon Ramsey utility functional, subject to a sequence of budget constraints involving interest rates and assets. Firms' demand for capital is determined by myopic profit-maximization, which in this case leads to the same actions as would present value maximization. For all but a unique sequence of interest rates, there will be non-zero excess demand for capital. It is shown that in this improbable economy, all decisions about future actions can be made today, so that the model may be detemporaIized. [ABSTRACT FROM AUTHOR]