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This paper presents an institutional model to investigate the cooperation between a government and a central bank. The former selects the monetary policy and then delegates the organization of macroprudential policy to the latter. Their policy stances are the result of sequential constrained utility maximization. Using indirect inference, we find a set of coefficients that can capture the UK policy stances for 1993–2016. This suggests post-crisis regulation has been overly intrusive. Finally, we show that this regulatory dilemma can be avoided by committing to a highly stabilizing monetary regime that uses QE extensively.

We add the Bernanke–Gertler–Gilchrist model to a modified version of the Smets–Wouters model of the U.S. in order to explore the causes of the banking crisis. The innovation of this article is estimating the model using unfiltered data allowing for non-stationary shocks in order to replicate how the model predicts the crisis. We find that ‘traditional shocks’ account for most of the fluctuations in macroeconomic variables; the non-stationarity of the productivity shock plays a key role. Crises occur when there is a ‘run’ of bad shocks; based on this sample they occur on average once every 64 years and when they occur around 10% are accompanied by financial crisis. Financial shocks on their own, even when extreme, do not cause crises – provided the government acts swiftly to counteract such a shock as happened in this sample.

In recent years, the once conventional view that nominal wage rates were much more flexible before the Great Depression than after has been challenged. This challenge has been reinforced by several recent studies that are based on monthly wage data gathered by state labor bureaus. The surveys used by the state labor bureaus in gathering the data appear to have been biased toward the finding that wages have not changed. Hence inferences drawn from the data collected in these surveys are not reliable.

Strange as it seems, the infamous Smoot-Hawley Tariff might have had an expansionary effect on the U.S. economy. Basic macroeconomic principles indicate that the direct effect of a tariff increase is expansionary. This expansionary effect might be offset by retaliatory increases in foreign tariffs. Barry Eichengreen has recently questioned whether significant retaliation to Smoot-Hawley occurred. This article demonstrates that the tariff increases enacted during 1930 in Canada—the largest trading partner of the United States—were in direct response to Smoot-Hawley. The conventional wisdom that Smoot-Hawley hurt the U.S. economy may be right after all.

The UKs stagflation in the 1970s is decomposed into its causative factors, using the Liverpool rational expectations model. It is found that there was a large rise in the natural rate of unemployment, mainly due to rising union density; that fiscal and monetary shocks had little effect on the resulting rise in unemployment; and the high inflation of the period was due to persistent and large fiscal deficits, with their accompanying monetization. Mrs Thatcher inherited an inflation induced by an ongoing deficit and a natural rate of over 2 million unemployed.

This paper applies an algorithm for the solution of partial current information in rational expectation models to the quarterly Liverpool macroeconomic model of the U.K. The algorithm is shown to produce marginally superior results in forecasts both in ex-post and ex-ante forecasts and can be viewed as an additional tool for the forecaster's kit-bag.

This paper presents an algorithm for the solution of a non-linear rational expectations model with current partial information. Even the solutions of small linear models can be intractable in the case of current partial information. The algorithm is tested on a theoretical linear rational expectations with a known analytic solution.

where X equals one of six categories of investment spending and the S's are dummy variables representing the periods during which the political shocks were thought to have had their influence. The test of the importance of the political shocks consisted of examining the t-statistics for the dummy variables. They found that none of the five negative shocks had a statistically significant (at the 1 percent level) effect on any of the six categories of investment spending. The only result consistent with the hypothesis was that the sole positive shock-the 1938 election-had a statistically significant effect on one category of investment spending. Mayer and Chatterji rejected "[tihe hypothesis that political shocks were significant factors in generating the low level of investment in the 1930s."3 There are, however, several problems with their analysis. Their formulation of the political explanation for low investment specifies that it resulted from the shock of specific events during the New Deal period. A more common formulation has the low investment resulting more from a general political demoralization. Joseph Schumpeter provided the classic discussion

Part 1 The new competitive reality: discovering the new market standards six standards of success - how America measures up dynamics of technical change and the new economic cycle. Part 2 People and organizations in the new economy: new structures that link organizations, industries, and markets competitive prospects in critical industries. Part 3 Job and skill demands in the new economy: the changing quantity, distribution, and quality of jobs the increasing need for complex and wide-ranging job skills sixteen job skills crucial to success. Part 4 Strategies for competitive success: organizational strategies for meeting the new competitive standards continuous learning - the cornerstone of economic progress. Conclusion: challenges facing America in the new economy.

When the Interstate Commerce Commission first gained substantial control over railroad freight charges in the early years of the 20th century, it used its power to ensure adherence to published tariffs and, hence, to reduce the volatility of freight charges. Following the passage of the Transportation Act of 1920, the Commission's dominant regulatory objective changed to one of providing railways with an adequate return on their invested capital. The Commission's attempts to attain this new objective resulted in substantial increases in real freight charges during economic contractions. The increase in real freight charges at the beginning of the Great Depression almost certainly increased its severity.

THE GROWING TENDENCY in economic theory is to analyze macroeconomic problems in the context of portfolio choice, with the most notable work in this field being that of Brainard and Tobin [2], and Tobin [12]. Typically portfolio decisions are assumed independent of spending decisions regarding the scale of activity. The homogeneity of portfolio behavior with respect to wealth, combined with appropriate balance sheet identities, implies a series of "adding up" conditions that need to be fulfilled when constructing individual portfolio equations. In this paper we propose an alternative approach to investment decisions including decisions regarding consumer durables and inventories. We argue that financial and commodity assets are considered part of the same portfolio decision, where closely related assets are nested so as to represent a multilevel sequential decision-making process. We regard households as deciding primarily about scales of assets size of house, of family, of cars, of heating, etc. and secondarily being involved in a consequent maintenance decision (nondurable consumption) running the house, feeding the family, servicing the car, etc. In the case of firms, we see them as deciding on a scale of physical assets in combination with a financial assets liability, and this involves a maintenance decision (or capital consumption). This amounts to putting the portfolio's composition in the center of

Analysis of census data reveals that the size of the average factory in the United States grew more rapidly during the 1870s and 1880s than during any subsequent decade through the 1920s. While the average factory doubled in size between 1869 and 1889, it increased by only about a quarter between 1899 and 1929. These results support the view that the reaping of economies of scale was not an important motive for the great merger wave.

Nominal wages in manufacturing were left unchanged by the large decline in nominal demand that marked the first two years of the Great Depression. This rigidity in nominal wages is explained using the tools of the behavioral theory of the firm. The emphasis is on the reasons firms changed their decision rules linking fluctuations in final sales to changes in nominal wages.