This paper suggests a structural connection between rational speculative activity and exchange rate volatility. We note that, when Friedman originally claimed that rational speculators must smooth exchange rate, he excluded interest rate differentials form his interpretation of speculator...

The paper examines possible consequences of subsidies to R&D and to volume production proposed under the Clinton administration's flat panel display initiative. We do this in the context of a model in which firms behave competitively in the short run, while realizing that their choices of...

In recent years, there has been a rise in the popularity of preferential trading arrangements (PTA), and an equally precipitous rise in the number of papers studying the effects of regionalism. In this paper we assess the effect of preferential trading arrangements on the aggregate and bilateral...

This paper studies the dynamics of inflation if monetary policy is transparent only to part of the population. We find that average long-run inflation decreases in the proportion of agents with naive expectations and, because of tradeoffs between speed of adjustment and long-run inflation,...