We study the response of investment to changes in uncertainty about future profits. We find that in industries dominated by small firms, an increase in uncertainty about future profits depresses investment; in all other industries, increased uncertainty has virtually no effect (or has a positive...

This paper examines the relationship between real exchange rates and real interest rates using three different approaches across four currencies and two horizons with 20 years of data. Each approach gives some encouragement that this relationship might hold, but each approach also encounters...

Using annual data for 450 manufacturing industries over the period 1958 to 1989, we establish the following stylized facts on the response of industry nominal wage growth to aggregate and industry influences: ; 1. We find support for the canonical wage contracts model outlined in Blanchard and...

Do increases in China's exports reduce exports of other emerging Asian economies? We find that correlations between Chinese export growth and that of other emerging Asian economies are actually positive (though usually not significant), even after controlling for trading-partner income growth...

We quantify the contribution of various driving forces to state-level movements in unemployment rates and employment growth from 1956 to 1992. Our story of regional fluctuations in the U.S. economy has a large cast of players -- including government contract awards and the basing of military...

We assess links between China and the rest of emerging Asia. Some commentators have argued that China’s apparent devaluation in 1994 may have contributed to the Asian financial crisis. We argue that the devaluation was not economically important: The more-relevant exchange rate was a floating...

We evaluate the merits of the "supply-side" view under which inflation results from sectoral shocks, and compare it with the "classical" view in which inflation results from aggregate factors such as variations in money growth. Using a panel VAR methodology applied to data for 13 GECD countries,...

This paper updates our earlier work (Ahearne, Fernald, Loungani and Schindler, 2003) on whether China, with its huge pool of labor and an allegedly undervalued exchange rate, is hurting the export performance of other emerging market economies in Asia. We continue to find that while exchange...

Our paper analyses the effects of restrictions on capital mobility on the output-inflation tradeoff. Using a stochastic version of the Mundell-Fleming model, we establish a theoretical presumption that an increase in restrictions on capital mobility should make the tradeoff parameter smaller,...

This paper provides evidence on the importance of the credit channel in the transmission of monetary policy. Changes in reserve requirements are used to measure "credit shocks." Reserve requirement changes are often made for regulatory reasons, and hence provide a more exogenous measure of...