Using Cointegrated Vector Auto-Regression analysis, we provide evidence for the US manufacturing sector that production capacities adjust endogenously to current output in the long run. The rate of capacity utilization, i.e. the output–capacity ratio, is found to be stationary since production...

We formulate a macro-model of a small open economy in order to investigate the relative performance of rules that respond to asset prices and those that do not. Our model consists of three asset prices: the stock price, the long-term interest rate and the exchange rate. These asset prices...

We analyze the role of social environment and human capital formation in persistence of poverty and inequality. We present a Romer type variety model where the presence of economies of agglomeration in social environment may cause two basins of attraction; whereby we may interpret the lower...

This paper demonstrates how the labour and product markets interact in determining as outcome a generalized reduced-form price Phillips curve. For the labour market we consider a wage Phillips curve and for the product market a price Phillips curve. We estimate separately the wage and price...