A market for used capital goods, or financial instruments that represent the ownership of the used capital goods, induces inflation taxes on wealth and on the nominal income flows they provide. This paper explicitly introduces trading in either used capital goods or financial instruments into...

A widely cited failing of real business cycle models is their inability to account for the cyclical patterns of ?nancial variables. Perhaps less well known is the fact that the return to capital and equity are identical in the neoclassical growth model. This paper constructs a measure of the...

It is well known that if there are mild sector-specific externalities, then the steady state of the standard two-sector real business cycle model can become indeterminate and endogenous business cycles can arise. We show that this result is not robust to the introduction of standard...

We attempt to explain the overreaction of asset prices to movements in short-term interest rates, dividends, and asset supplies. The key element of our explanation is a margin constraint that traders face which limits their leverage to a fraction of the value of their assets. Traders may lever...

Consider the following facts. In 1950, the richest countries attained an average of 8 years of schooling whereas the poorest countries 1.3 years, a large 6-fold difference. By 2005, the difference in schooling declined to 2-fold because schooling increased faster in poor than in rich countries....

We construct a dynamic Heckscher-Ohlin model in which the initial distribution of production factors across economies makes factor price equalization impossible. The model produces dynamics similar to those of the neoclassical growth model. However, free trade prevents identically parameterized...

The business cycle accounting "wedge" methodology is used to identify the mechanisms driving the rapid growth of Hong Kong, Singapore, South Korea, and Taiwan since 1966. Analysis with a neoclassical growth model reveals that growth in these economies has been sustained by different mechanisms...

Trends in gross domestic product (GDP) and total factor productivity (TFP) growth in the former socialist economies seem to indicate that these economies were converging to unusually low long-run growth rates in the late 1980s. In this paper we develop an endogenous growth model of...

What part of the high oil price can be explained by structural transformation in the developing world? Will continued structural transformation in these countries result in a permanently higher oil price? To address these issues I identify an inverted-U shaped relationship in the data between...

From 1960 to 2003, Turkey has underperformed relative to several Western economies, in terms of hours worked and output per hour. Our sectoral analysis illustrates two points. First, Turkey's large drop in hours is due to the fact that the substantial decline in agricultural hours has not been...