Financial capital and fixed capital tend to flow in opposite directions between poor and rich countries. Why? What are the implications of such two-way capital flows for global trade imbalances and welfare in the long run? This paper introduces frictions into a standard two- country neoclassical...

Conventional wisdom has it that inventory investment destabilizes the economy because it is procyclical to sales. Khan and Thomas (2007) show that the conventional wisdom is wrong in a general equilibrium (S,s) model with capital. We argue that their finding is not robust—the conventional...

We study the welfare cost of inflation in a general equilibrium life cycle model with growth, costly financial intermediation, and taxes on nominal quantities. We find a stationary equilibrium of the model matches a wide variety of facts about the postwar U.S. economy. We then calculate that the...

Recently, some analysts and economists had warned that the U.S. economy faces a much higher risk of falling into a recession should the price of oil rise to $100 per barrel or more. In February 2008, spot crude oil prices closed above $100 per barrel for the first time ever, and they have since...

This paper revisits the issue of what factors motivated the macroeconomic policies that led to the Great Inflation of the 1970s. A satisfactory explanation must be consistent with (1) the estimated monetary policy reaction function; (2) the timing patterns relating monetary policy developments...

We discuss specification of regression models for using migration data to infer the living standards of different regions, and for observing how much of the standard of living is determined by economic opportunities versus non-pecuniary amenities. We estimate a regression using Canadian data...

This paper presents a model of legal migration of temporary skilled workers from one source country to two host countries, both of which can control their levels of such immigration. Because of complementarities between capital and labor, the return on capital is positively related to the level...

Over the period 1927:Q1 to 2005:Q4, the average CAPM-based idiosyncratic variance (IV) and stock market variance jointly forecast stock market returns. This result holds up quite well in a number of robustness checks, and we show that the predictive power of the average IV might come from its...