In classical macroeconomic models with flexible wages and prices,whether a tax is levied on producers or consumers does not affect its incidence. However, if wages or prices are rigid in the short run, as they are in Keynesian macroeconomic models, then shifting a tax from one side ofthe market...

Modern neoclassical theories of the business cycle posit that aggregate fluctuations in consumption and employment are the consequence of dynamic optimizing behavior by economic agents who face no quantity constraint. In this paper, we estimate an explicit model :f this type. In particular, we...

Hall has pointed out that, when there is perfect competition and price flexibility, labor hoarding alone will not induce the Solow residual measured using labor's share in revenues to be procyclical. We show that, even with perfect competition, a small amount of price rigidity - we assume firms...

This paper proposes a method for separating economic time series into a smooth component whose mean varies over time (the trend') and a stationary component (the cycle'). The aim is to make the trends as smooth as possible while also producing cycles with plausible properties. While the main...

This paper examines the connection between money and the terms of trade in the context of a simple monetary equilibrium model with flexible prices. Money is held for transactions purposes. Because carrying out financial transactions is costly, households visit their financial intermediaries only...

This paper presents the competitive equilibrium of an economy in which people hold money for transactions purposes. It studies both the steady states which result from different rates of monetary expansion and the effects of such non-steady state events as an open market operation. Even though...

A model is developed which rationalizes contracts that give depositors the right to obtain funds on demand even when depositors intend to use these funds for consumption in the future. This is explained by depositor overoptimism regarding their own ability to collect funds in a run. Capitalized...

In a search model, prospects encounter salespeople who can try to persuade them. Persuasive messages can increase the utility of buying or increase the cost of not buying. The latter reduces welfare. Equilibria where only some salespeople make a persuasive effort often exist. Salespeople vary in...

This paper studies quality choice in a model where consumers expect firms (or brands) to act altruistically. Under plausible assumptions regarding this altruism and the reaction of consumers to firms that demonstrate insufficient altruism, existing brands can face a larger demand for new...

A model is considered where firms internalize the regret costs that consumers experience when they see an unexpected price change. Regret costs are assumed to be increasing in the size of price changes and this can explain why the size of price increases is less sensitive to inflation than in...