When equity prices are determined as the discounted sum of current and expected future dividends, Shiller (1981) and LeRoy and Porter (1981) derived a relationship between the variance of the price of equities, p(t), and the variance of the ex post realized discounted sum of current and future...

The purchasing power parity puzzle relates to the adjustment of real exchange rates. Real exchange rates are extremely volatile, suggesting that temporary shocks emanate from the monetary sector. But the half-life of real exchange rate deviations is extremely large -- 2.5 to 5 years. This...

This paper examines whether the sector bias of skill-biased technical change (sbtc) explains changing skill premia within countries in recent decades. First, using a two-factor, two-sector, two-country model we demonstrate that in many cases it is the sector bias of sbtc that determines sbtc's...

In this paper I analyze whether international trade contributes to per capita income convergence across countries. The analysis focuses on four important post-1945 multilateral trade liberalizations. To identify trade's effect on income dispersion, in each case I use a difference-in-differences'...

In this paper I try to determine whether international trade has been increasing the own-price elasticity of demand for U.S. labor in recent years. The empirial work yields three main results. First, from 1960 through 1990 demand for U.S. production labor became more elastic in manufacturing...

Failures of the law of one price explain much of the variation in real C.P.I. exchange rates. We use C.P.I. data for U.S. cities and Canadian cities for 14 categories of consumer prices to examine the nature of the deviations from the law of one price. The distance between cities explains a...

This paper uncovers a striking empirical regularity: the consumer price of a good relative to a different good within a country tends to be much less variable than the price of that good relative to a similar good in another country. This fact seems to hold for all goods except very simple,...

A Markov-switching model is fit for eighteen exchange rates at quarterly and monthly frequencies. This model fits well in-sample at the quarterly frequency for many exchange rates. By the mean-squared-error or mean-absolute-error criterion. the Markov model does not generate superior forecasts...