Economists have offered many theories for the U.S. Great Depression, but no consensus has formed on the main forces behind it. Here we describe and demonstrate a simple methodology for determining which theories are the most promising. We show that a large class of models, including models with...

This study analyzes two monetary economies, a cash-credit good model and a limited-participation model. In these models, monetary policy is made by a benevolent policymaker who cannot commit to future policies. The study defines and analyzes Markov equilibrium in these economies and shows that...

This paper uses a simple, graphical approach to analyze what happens to commodity prices and economic welfare when futures markets are introduced into an economy. It concludes that these markets do not necessarily make prices more or less stable. It also concludes that, contrary to common...

AK growth models predict that permanent changes in government policies affecting investment rates should lead to permanent changes in a country’s GDP growth. Charles Jones (1995) sees no evidence for this prediction in data for 15 OECD countries after World War II: rates of investment,...

Applied macroeconomists interested in identifying the sources of business cycle fluctuations typically have no more than 40 or 50 years of data at a quarterly frequency. With sample sizes that small, identifi cation may not be possible even with correctly specifi ed representations of the data....

This study demonstrates that the U.S. equity premium has declined significantly during the last three decades. The study calculates the equity premium using a variation of a formula in the classic Gordon stock valuation model. The calculation includes the bond yield, the stock dividend yield,...

The value of U.S. corporate equity in the first half of 2000 was close to 1.8 times U.S. gross national product (GNP). Some stock market analysts have argued that the market is overvalued at this level. We use a growth model with an explicit corporate sector and find that the market is correctly...

Most models of aggregate economic activity, like the standard neoclassical growth model, ignore the fact that equipment and structures are maintained and repaired. Once physical capital is purchased in these models, there are typically no more decisions made regarding its use. The theme of this...

This article describes changes in the number of average weekly hours of market work per person in the United States since World War II. Overall, this number has been roughly constant; for various groups, however, it has shifted dramatically - from males to females, from older people to younger...

This article describes the academic debate about the usefulness of the capital asset pricing model (the CAPM) developed by Sharpe and Lintner. First the article describes the data the model is meant to explain—the historical average returns for various types of assets over long time periods....