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This article will examine the original Housing Opportunity for People Everywhere (HOPE) VI sites in the cities of Atlanta, Baltimore, Charlotte, and Washington, D.C., to determine if surrounding home sales increase after its completion. The author utilizes an Adjusted Interrupted Time Series (AITS) method, first developed by Galster, Temkin, Walker, and Sawyer (2004), to examine the effects of the HOPE VI program on local real housing prices (which is utilized as a proxy for local economic development in this paper and in previous urban economic research). The author found that the prices of housing units in the HOPE VI concentric rings of a half mile and 1 mile around the HOPE VI site increased after completion. The results also showed that the housing price trend around the HOPE VI site began to increase after the completion date of each site. The price trend of housing units in the inner ring of the HOPE VI sites grew more than those in the outer ring. Therefore, the results indicate that the HOPE VI site has a significant and positive influence on housing prices. [ABSTRACT FROM AUTHOR]

This paper reviews the literature on economic development as it relates to indigenous people in the United States and Canada, and focuses on how institutions affect economic development of reservation and reserve economies. Evidence shows that strong property rights to reservation and reserve land and natural resources, whether communal or individual, are and always have been important determinants of productivity. Political and legal institutions that are perceived as stable and predictable to tribal members and to non-Natives also improve economic opportunities for indigenous people living on reservations and reserves. Research reviewed here also shows that culture and acculturation are important in the development process. Although our emphasis is on North America, the findings are applicable to indigenous people in other parts of the world and shed light on growth questions that loom large for developing countries around the world. [ABSTRACT FROM AUTHOR]

The mechanisms shaping a shift in intrametropolitan self-employment remain poorly understood. In response, this study aims to examine shifts in both central-city and suburban self-employment by integrating the changing forces of intrametropolitan economy and population with their economic interdependence within an entire metropolitan area. Using a change-score model, data collected over two timeperiods (1980-90 and 1990-2000) are pooled. The analysis shows that a decline in intrametropolitan manufacturing employment, which can be understood as an aspect of local economic restructuring, leads to an increase in intrametropolitan self-employment. Also, the data suggest that a rise in metropolitan-level immigrant population contributes to the growth of central-city self-employment. Moreover, this paper demonstrates that a shift in central-city self-employment is affected by both central-city and suburban economic transformations. [ABSTRACT FROM AUTHOR]

This paper examines some economic forecasts made in late 1930 that were intended to predict economic activity in the United States in order to shed light on several methodological issues. We document that these forecasts were extremely optimistic, predicting that the recession in the US would soon end, and that 1931 would show a recovery. These forecasts displayed egregious errors, because 1931 witnessed the largest negative growth rate for the US economy in any year in the twentieth century. A specific question is what led forecasters to make such serious and substantial empirical errors. A second more general issue involves the methodology of forecasting. The 1930 forecasts were sometimes based on explicit analogies with previous serious business cycles. Modern forecasting approaches are based on techniques that may not be recognized as analogies. Using the 1930 forecasts, we examine the implicit‐analogy content of forecasts, and what might render such implicit analogies valid or invalid. This 1930 forecast example also resonates beyond the confines of economic methodology because forecasts about the Great Depression are of continuing interest to the profession at large, and we produce a forecast series not previously available. [ABSTRACT FROM AUTHOR]

This paper tests the relationship between primacy and economic development for countries in Asia and the Americas. It tests explanations for primacy drawn from several social-science disciplines – demography, economics, geography, political science, and sociology. The study is one of the first to use panel-data estimators for the tests. Economic and domestic political variables are found to be important determinants of primacy. In particular, rent-seeking and dictatorial governments are associated with primacy, but the association exists independent of the level of economic development. The implication from dependency and world-system theories that current international economic interactions promote primacy is not supported. It also examines the hypothesis that primacy first increases and then decreases with GDP per capita. [ABSTRACT FROM AUTHOR]

Considerable ambiguity exists regarding the assessment of regional economic development. Alternative measures often produce conflicting conclusions. Even if economic development progress is defined as improvement in economic welfare, it is not directly measurable. Therefore, this paper develops a theoretical framework that explores the potential linkages between regional utility and commonly used economic measures. State trends in these measures are then examined for the 1990s and related to the theoretical framework. The exercise reveals that no single measure should be preferred in assessing economic development, although it is possible to separate strong performers from weak performers. [ABSTRACT FROM AUTHOR]

This paper uses a &anger causality test adapted for use with cross-section time series data, to (1) test the relationship between lottery revenue and state economic growth (per capita income), and (2) address the importance of cross-border purchases in the relationship. Neither issue has been empirically tested previously. Previous evidence (Caudill, et al., 1995) suggests that states surrounded by lotteries are more likely than isolated states to introduce lotteries. But the empirical results here suggest that lotteries do not contribute to economic growth unless the state is isolated from other state lotteries. The importance of isolation suggests that cross-border purchases (exports) of lottery tickets have a significant impact on the effectiveness of lotteries as fiscal policies, and that "defensive" lotteries (those introduced to keep citizens from buying tickets from neighboring states) are ineffective. [ABSTRACT FROM AUTHOR]

Most economists agree that the slowdown in aggregate productivity growth in the U.S. since the mid-1960s has played a pivotal role in the poor performance of the U.S. economy. This mystery perhaps, stems more from the limitations of conventional economic analysis than from the impenetrability of slower productivity growth. Prevailing economic analysis typically neglects the human dimensions of production and the institutional contexts within which economic actors operate. In this paper an alternative account of the productivity slowdown that addresses these various lacunae has been developed. This article presents an alternative account of the productivity slowdown in five parts. Some simple "stylized facts" related to work intensity and business innovation are first summarized. It then outline the basic elements of a social model of aggregate productivity growth. A detailed econometric test of that model is next presented, providing a comparison of its explanatory power with that of more conventional approaches. It next evaluates several possible additional or alternative hypotheses about the productivity slowdown, showing that the basic results of the paper are robust even when confronted with competing or supplementary interpretations. The paper concludes with a brief discussion of the policy implications that might be drawn from the explanation of the productivity puzzle.

This paper considers the historical record and time series properties of United States' industrial production for the period 1860 to 1991, utilizing unit root tests and measures of persistence. The results identify a segmented trend model which is used to assess the time-series simulation performance of four well-known models of economic growth: Solow (1957); Mankiw, Romer and Weil (MRW, 1992); Barro and Sala i Martin (BSM, 1992); and Rebelo (1991). Both the MRW and BSM models dominate the Solow model in accounting for twentieth century industrial growth, high-lighting the importance of human capital, and the paper suggests a new measure related to higher education. However, the Rebelo model explains the post-1973 slowdown more successfully than either of the 'augmented-Solow' approaches. The paper concludes with a discussion of the impact of shocks on US industrial growth. [ABSTRACT FROM AUTHOR]

The question of outdoor recreation has received considerable attention in recent years. In spite of the growing importance the economics of outdoor recreation have been almost completely neglected except for the relatively esoteric questions of whether the benefits to society from outdoor recreation can or cannot be measured. This is unfortunate, for economic analysis has much to contribute to society's stake in outdoor recreation and, conversely, a thoroughgoing economic analysis of outdoor recreation reveals some very interesting theoretical and methodological questions having ramifications in other areas of social policy. This paper explores several economic aspects of outdoor recreation including: first, the economic rationale for the public provision of outdoor recreation, second, the resource management problems encountered in supplying such services and third, optimum financing policies for publicly-supplied recreation. Outdoor recreation, the great out-of-doors, is an important part of the American heritage and a legitimate concern of government. Public ownership and operation can be justified quite dispassionately and it can be put on a perfectly sound financial basis. Over the long run this approach is more likely to protect and promote this heritage than is the usual wholly emotional appeal to non-economic criteria.

The article presents a paper on economic-demographic interactions and long swings in economic growth. The paper building on the work of numerous predecessors, suggests that one of the mechanisms responsible for long swings in economic growth may involve interactions among aggregate demand, labor-market conditions, and household growth, with a feedback effect from the last to the first. An upswing in the growth of aggregate demand and the growing labor-market tightness induced thereby engenders accelerated marriage, migration, and household growth. These are critical decision points in the life cycle, entailing spending commitments extending over several years as a new home is established and a family started or settled. In effect, such commitments are geared to a notion of permanent income and thus tend to be relatively insensitive to short term income changes. A bunching of such commitments serves to cushion the economy against the usual business cycle and becomes exhausted only gradually. Such a bunching of long term spending commitments may be the key to Kuznets cycle phenomena.

In the great revival of interest in economic development in the U.S. that has marked the past decade, attention has centered on two main questions: the determining factor of the over-all rate of economic advance; and the optimal allocation of given resources to promote growth. Analysis of the growth rate has relied mainly on the Keynesian tools and has produced a multiplicity of aggregate growth models. In the field of resource allocation, controversy centers around the implications of the classical principle of comparative advantage, according to which growth is promoted by specialization. The present paper discusses the analysis of resource allocation in less developed economies from three points of view. One section tries to ascertain the extent to which the allocation principles derived from trade theory and from growth theory can be reconciled with each other without losing their operational significance. Another section compares various approaches to the measurement of optimal resource allocation in terms of their logical consistency and their applicability to different conditions. One section examines some of the practical procedures followed in setting investment policy in underdeveloped countries in the light of the earlier discussion. Some of the theoretical issues are re-examined to indicate their practical importance.

The widespread tendency in empirical studies of economic behavior to discard war years as "abnormal," while doubtless often justified, is, on the whole, unfortunate. The major defect of the data on which economists must rely on is that the data generated by experience rather than deliberately contrived experiment, encompasses a small range of variation. Experience in general proceeds smoothly and continuously. In consequence, it is difficult to disentangle systematic effects from random variation since both are of much the same order of magnitude. From this point of view, data for wartime periods are peculiarly valuable. At such times, violent changes in major economic magnitudes occur over relatively brief periods, thereby providing precisely the kind of evidence that we would like get by "critical" experiments if we could conduct them. Of course, the source of changes means that effects in which we are interested are necessarily intertwined with others that we would eliminate from a contrived experiment. But this difficulty applies to all our data, not to data for wartime periods alone. To the student of monetary phenomena, the three wartime episodes with which this paper deals the experience of the United States in the Civil War, first World War and second World War offer an especially close approximation to the kind of critical experiment he would like to conduct. As we shall see, in all three cases the rise in prices was of almost precisely the same magnitude, so this critical variable is under control. Yet other crucial features varied, offering the opportunity to test alternative hypotheses designed to explain price changes. Besides their significance for the general understanding of monetary phenomena, the wartime experiences are unfortunately of interest in their own right.

Presents information related to several articles on economics. Economic growth and productivity in the United States, Canada, Great Britain, Germany and Japan in the post war period; Dividend policies of electric utility firms; Relationship between the quantity of materials imported by the United States and the level of industrial production and prices of imports.

Copyright of Regional Studies is the property of Routledge and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper uses OLS regressions to understand the relationship between household debt, income inequality, and economic growth in the United States. For robustness we use two different measures of income inequality. The results show that, for the period 2003–2012, there is statistical evidence that increases in household debt are associated with lower levels of economic growth and higher rates of unemployment. In addition, we uncover evidence that high growth rates in household debt are associated with negative growth in income inequality, likely because debt caused economic growth to slow, diminishing the returns of top earners. [ABSTRACT FROM AUTHOR]

A key challenge of the twenty-first century will be to combine post-carbon economic transition with socioecological healing of the legacy damages concatenating from the fossil fuel era. What political and knowledge structures do we need to create integrated solutions to both of these challenges? In this paper, we draw lessons from grassroots social and environmental justice movements in Appalachia that seek post-coal economic transition. This article is in two parts. The first part analyzes participatory action research on regional economic transition conducted by the economic transition team of the Alliance for Appalachia (a regional coalition of sixteen grassroots organizations) from 2013 through 2015. Part 2 of this article looks at the Alliance's work from 2016 to the present (and will appear in a future issue of this journal). [ABSTRACT FROM AUTHOR]

A better understanding of the relationship between public investments in agricultural R&D and the productivity enhancing benefits they produce is critical to informing the public funding of agricultural R&D and insuring future increases in agricultural productivity. This paper describes a method of estimating the relationship between research investments, productivity growth, and the resulting economic benefits generated. The data requirements include indexes of multi-factor productivity, investments in R&D, and the value of agricultural output. The real rate of return to public investments in agricultural R&D in the United States is estimated to be 10.5% per annum; however, a reduction in the growth of spending on public agricultural R&D in recent decades raises concerns about productivity growth in coming decades, which is required to insure an adequate supply of food to meet increasing demand. [ABSTRACT FROM AUTHOR]

This paper uses recent data on both broadband availability and adoption to empirically gauge the contribution of broadband to the economic growth of rural areas of the United States over the past decade. Availability data from the National Broadband Map aggregated to county level is used in conjunction with county-level adoption data from Federal Communication Commission. Economic variables of interest include median household income, number of firms with paid employees, total employed, percentage in poverty, and the percentage of employees classified as either creative class or non-farm proprietors. A propensity score matching technique (between a “treated” group associated with various broadband thresholds and a control group) is used to make preliminary causal statements regarding broadband and economic health. Growth rates between 2001 and 2010 for different economic measures are tested for statistical differences between the treated and non-treated groups, restricting the analysis to non-metropolitan counties. Results suggest that high levels of broadband adoption in rural areas positively (and potentially causally) impacted income growth between 2001 and 2010, and negatively influenced unemployment growth. Similarly, low levels of broadband adoption in rural areas lead to declines in the number of firms and total employment numbers in the county. Broadband availability measures (as opposed to adoption) demonstrate only limited impacts, suggesting that future broadband policies should be more demand-oriented. [ABSTRACT FROM AUTHOR]

The article presents information on the book "The Other Side of the Frontier: Economic Explorations Into Native American History," edited by Linda Barrington. The book presents recent economic explorations into key episodes of Native American economic history. The book discusses economy, ecology, and institutions in the emergence of humankind, the Mississippians and economic development before European colonization, how Plains Indian institutions and culture responded to the introduction of the horse, the roles of Native Americans, the Hudson's Bay Company, property rights, and competition in the depletion of the beaver, 1700-1763. The book also presents information on, the subsistence versus trade and growth in the eighteenth-century South-eastern American Indian economy. In addition to that, the article presents information on various other features of the book.

The article reports on the forecast of the CIT Group that the textile industry is expected to grow in the year 1998 to 1999. In the CIT Group's annual forecast, it is stated that after two consecutive years of decline, real U.S. textile shipments should reach nearly 80 U.S. billion dollars in 1997. It is said that the new outlook says real growth will moderate during 1998 and 1999 at rates of 2.1 percent and 0.9 percent respectively. It is further reported that specialty fibers such as spandex have recently been attractive.

This paper selects China and Thailand as a reference object. Based on the U. S. market, it analyzes the export competitiveness of the agricultural products of China and Thailand by market share and growth rate, measures the agricultural products of China and Thailand export competition degree by export product similarity innex and estimates the agricultural products of China and Thailand export competitiveness strength by shift share method. The results show that: At present, in the U. S. market, the competition of the agricultural products of China and Thailand is fierce, but export growth of China's agricultural products is faster and more competitive. Finally on how to further improve China's agricultural exports competitiveness in the U. S. market and promote China's agricultural export trade to the U. S. it puts forward the related countermeasures and suggestions. [ABSTRACT FROM AUTHOR]

Modern growth theory suggests that more than three-quarters of growth since 1950 reflects rising educational attainment and research intensity. As these transition dynamics fade, US economic growth is likely to slow at some point. However, the rise of China, India, and other emerging economies may allow another few decades of rapid growth in world researchers. Finally, and more speculatively, the shape of the idea production function introduces a fundamental uncertainty into the future of growth. For example, the possibility that artificial intelligence will allow machines to replace workers to some extent could lead to higher growth in the future. [ABSTRACT FROM AUTHOR]

Copyright of Berichte zur Wissenschafts-Geschichte is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The paper discusses the change of the influence of certain branches and branch changes on the economic growth, particularly the labor productivity observed in the last few decades. As a result the processing industry is replaced by the service sector, which gradually becomes dominating since 1970s. For this purpose it is proved with the results of a long-lasting work of the Groningen Growth and Development Centre (The Netherlands) concerning countries from European Union and USA in the second half of 20th century - mainly in 1980s and 1990s and until the middle of the first decade of 21st century. The achieved results give reasons for a change of the existing stylized facts formulated by N. Kaldor (1967), S. Kuznets (1971) and A. Maddison (1980). [ABSTRACT FROM AUTHOR]

The analysis of synchronization among regional or national business cycles has recently been attracting a growing interest within the economic literature. Far less attention has instead been devoted to a closely related issue: given a certain level of synchronization, some economies might be systematically ahead of others along the swings of the business cycle. We analyze this issue within a system of economies and show that leading (or lagging behind) is a feature that does not occur at random across the economies. In addition, we investigate the economic drivers that could explain this behavior. To do so, we employ data for 48 conterminous US states between 1990 and 2009. [ABSTRACT FROM AUTHOR]

This paper analyses the degree of synchronization between the Mexican states and the US business cycles by using a growth cycle approach for the period 1997-2007. The business cycle indicators are obtained from seasonally-adjusted monthly manufacturing production. Our results confirm that the Mexican aggregate cycle is highly synchronized with the US business cycle. However, although specific Mexican state cycles are pro-cyclical with respect to the US business cycle, their synchronization is very heterogeneous. In particular, it is strong and robust only for the states of Baja California, Jalisco, Nuevo León and the Federal District, and at least moderate for the state of Mexico and Querétaro. The results are robust with respect to three different detrending methods. Synchronization may be explained by the high volumes of international trade carried out by foreign firms in the case of the central and traditionally industrialized states, and by the "maquila" production in the Northern bordering states. This synchronization may be explained by the vertical integration of the productive processes resulting from the internationalization of production of multinational firms. [ABSTRACT FROM AUTHOR]

Neoliberal theory rationalizes inequality as both 1) necessary for growth and 2) offset by a trickle down to lower income groups. However, benefits from income growth failed to reach most of the population for the last several decades in the United States. Instead, a negative trickle down has lowered many people's wellbeing. The first aspect of negative trickle down is a new form of Veblen's conspicuous consumption with positional goods. The second is the effect on the provision of public goods. The third is the competition for limited resources, such as housing. We review how greater income inequality contributes to each. [ABSTRACT FROM AUTHOR]

Abstract: Economic losses caused by tropical cyclones have increased dramatically. Historical changes in losses are a result of meteorological factors (changes in the incidence of severe cyclones, whether due to natural climate variability or as a result of human activity) and socio-economic factors (increased prosperity and a greater tendency for people to settle in exposed areas). This paper aims to isolate the socio-economic effects and ascertain the potential impact of climate change on this trend. Storm losses for the period 1950–2005 have been adjusted to the value of capital stock in 2005 so that any remaining trend cannot be ascribed to socio-economic developments. For this, we introduce a new approach to adjusting losses based on the change in capital stock at risk. Storm losses are mainly determined by the intensity of the storm and the material assets, such as property and infrastructure, located in the region affected. We therefore adjust the losses to exclude increases in the capital stock of the affected region. No trend is found for the period 1950–2005 as a whole. In the period 1971–2005, since the beginning of a trend towards increased intense cyclone activity, losses excluding socio-economic effects show an annual increase of 4% per annum. This increase must therefore be at least due to the impact of natural climate variability but, more likely than not, also due to anthropogenic forcings. [Copyright &y& Elsevier]

A central issue in the debate regarding the relevance of social capital is whether the decline in social embeddedness that has attended modernization over the last 40 years in the United States is as harmful as Putnam, among others, claim it to be. Critics of Putnam's thesis argue that various arms-length institutions fulfil the roles performed by social capital thereby mitigating the negative impact of its recent decline. We develop a framework that provides insight into when such institutions may be adequate and when they might not. We find that if market (economic) and non-market (social) interactions differ in their payoffs but are interlinked through the modernization of the economy, the optimal level of modernization in market interactions will be higher than that in non-market interactions. Further, market supporting institutions are likely to increase the divergence between economic and social interactions since analogs for market institutions that constrain opportunistic behavior are usually nonexistent in social contexts. In this sense, economic progress may be accompanied by social regress. [ABSTRACT FROM AUTHOR]

We discuss a method to estimate the confidence bounds for average economic growth, which is robust to misspecification of the unit root property of a given time series. We derive asymptotic theory for the consequences of such misspecification. Our empirical method amounts to an implementation of the subsampling procedure advocated in Romano and Wolf. Simulation evidence supports the theory and it also indicates the practical relevance of the subsampling method. We use quarterly postwar US industrial production for illustration and we show that non-robust approaches rather lead to different conclusions on average economic growth than our robust approach. [ABSTRACT FROM AUTHOR]

Published QUARTERLY in the interest of constructive synthesis in the social sciences, under grants from the FrancisNeilsonFund and the RobertSchalkenbachFoundation.Founded in 1941Volume 64 April, 2005 Number 2 [ABSTRACT FROM AUTHOR]

Many social scientists believe that supporting entrepreneurship development within low-income communities is a viable development strategy to combat poverty. Some even suggest that if economic development is to be effective, new businesses in low income areas must be started through local initiatives, and that entrepreneurship is critical to the maintenance of a healthy economy. Underpinned by recent scholarship and grass-roots movements that suggest that presence of smaller scale, locally-controlled enterprises can help determine whether communities prosper or decline, this paper explores the links between entrepreneurship and rural development. Using a theory of change framework (Oldsman and Hallberg 2002), the authors examine the USDA 1890 Entrepreneurial Outreach Initiative (USDA 2004) and its use as a local, community-based strategy to spur economic growth and development in rural communities across the South. [ABSTRACT FROM AUTHOR]

The article presents the study on the economic growth and development in the U.S. Many economists and international organizations argue that investment in education is a policy priority. Recently, some studies have provided more reliable findings on specific policies and programs. This article examines this recent work in detail. The article, therefore offers three objectives which is to review the literature on the relationship between school and teacher characteristics, and the acquisition of cognitive skills, to examine the relationship between schooling and labor productivity, and to investigate the relationship between cognitive skills and socioeconomic outcomes other than labor productivity. A final section summarizes the findings and provides recommendations for future research.

In this paper we investigate how telecommunications infrastructure affects economic growth. We use evidence from 21 OECD countries over a 20-year period to examine the impacts that telecommunications developments may have had. We jointly estimate a micromodel for telecommunication investment with a macro production function. We find evidence of a significant positive causal link, especially when a critical mass of telecommunications infrastructure is present. Interestingly, the critical mass appears to be at a level of telecommunications infrastructure that is near universal service. (JEL O57, O47, L69) [ABSTRACT FROM AUTHOR]

In recent years the American states have begun to adopt new types of economic development policies, variously called "demand side" policies, industrial policy, or interventionist policy. In this paper the authors discuss the emergence of these policies and the political and economic changes in states which led to their consideration. Two explanations for their adoption are developed--the business capture hypothesis and the meso-corporatist hypothesis. These differing interpretations are tested with data on state interest groups, government capacity, and economic stress. Data on policy adoptions by 1986 show that the meso-corporatist model provides a better account of industrial policy than does the business capture hypothesis. [ABSTRACT FROM AUTHOR]

The major problem of base theory is the lack of an acceptable and objective technique to identify the export and service employment in the local economy. In this article, researchers propose and test a new approach to handle this problem. The findings as presented in this paper further confirm researchers belief that the Location Quotient approach is not an appropriate technique to measure and forecast the economic base of a region. This conclusion is in complete agreement with other studies that have also evaluated this technique." However, researchers go beyond these criticisms and findings by presenting a new approach for conducting economic base analysis. The new model provides the regional analyst a more objective tool for conducting economic base analysis and it can show him how national growth may constrain local growth despite his efforts to boost local employment. Another unique characteristic of this new model is that it can be easily linked to national quarterly models of the U.S. economy such as the Wharton or Brookings model.

This paper is an attempt to contribute to the integration of business-cycle analysis with long-term growth. a real-business-cycle model with endogenous growth is developed and estimated with U.S. data. In the present framework, wage movements do not have to be transitory to generate fluctuations in labor effort. The reduced form is a constrained bivariate output/hours (or real-wage/hours) VAR process. The bivariate setup provides a useful framework for analyzing the persistence of output fluctuations, given that the theory implies that hours of work contain information about future output movements. [ABSTRACT FROM AUTHOR]

In recent years, the policy mix-defined as the contemporaneous joint state of monetary and fiscal policy-has conditioned the patterns of the business cycle, set up numerous imbalances in macroeconomic and microeconomic behavior, and is laying the groundwork for future economic performance. Restrictive monetary and fiscal policies produced back-to-back economic downturns in 1980 and 1981-82. From 1982 to 1985, massive fiscal stimulus against a backdrop of monetary growth targeting by the Federal Reserve comprised a "loose fiscal-tight money" policy mix. Subsequently, an actual and prospective tightening of the federal budget and suspension of monetary growth targeting suggest a shift in the policy mix to a "tight fiscal-easier money" combination. In this paper, the policy mix of the 1980's first half-in the context of an open economy with flexible exchange rates-is characterized. Some of the important economic and financial effects are identified. Among these are higher nominal and real interest rates than otherwise would have been the case, a strong domestic currency, lower inflation rates, a large and growing trade deficit, an unbalanced composition of economic activity across sectors and industries, and a depressed industrial sector.

There has been much concern recently that large U.S. deficits have, or will soon, produce high interest rates, thus hindering capital formation and economic growth in the U.S. and the rest of the world. In this paper, the author surveys U.S. history to determine whether this concern has merit. There are three periods during which the federal deficit has exceeded 10 percent of national income. In none of these periods did interest rates rise appreciably. Regression analysis applied to data from these three periods has not uncovered a positive association between deficits and interest rates. Economists like to think of economics as a science. In a science, repeated contradictions of a paradigm lead to its abandonment if there is any sensible alternative. One paradigm in economics implies that large deficits produce high interest rates. This paradigm is not supported by the facts. In over a century of U.S. history, large deficits have never been associated with high interest rates. Even the postwar periods separately offer no support for a positive association between deficits and interest rates. Indeed, the evidence more strongly supports a negative association than a positive one. Therefore, it seems that economists should be looking for an alternative paradigm to replace their current one.

This article presents a study in economics about the capital market and the dynamics of growth in the U.S. It investigated the effects of introducing an equity security into a money and growth framework. The model was developed explicitly in terms of securities and capital instead of the more traditional treatment in terms of money and capital. The model was reduced to three differential equations in capital intensity, the wealth ratio, and price expectations. Based on the reduced system, equilibrium and global stability were analyzed. The stability of the model was found to depend crucially on whether the direct interest rate effect was greater than the offsetting wealth effect and whether the rate of forced saving was greater than the adjustment in the rate of inflation. It is proposed that the crucial role of financial markets in general, and security markets in particular, is to take the short-run impact of economic disturbances and allow the rate of inflation to adjust slowly to changes in the economic environment.

This article discusses the stability properties of optimal economic policies in the U.S. Stochastic elements have a stabilizing influence, rather intriguing in view of the fact that in purely descriptive dynamic models such disturbances tend to be destabilizing. Basically the reason for this is that the existence of stochastic elements exerts an inhibiting influence on the policy maker, causing him to adjust his instruments more cautiously than he otherwise would, thereby dampening the adjustment and making it stable. At the same time it means that typically there is correspondingly less response in the target so that as in this example it may no longer be optimal to drive it to its desired equilibrium each period. In this sense the stochastic disturbances exert a destabilizing effect, although of course the target still remains stochastically stable. Thus a kind of tradeoff between the two kinds of stability is seen to occur, although overall the entire system is stochastically stable.