It is often alleged that high auction prices inhibit build-out. We investigate this claim under the extreme case of budget-constrained bidders. Low prices maximize overall the gains from trade. If there are n licenses, the price where the budget constraint just binds maximizes consumer surplus...

This paper evaluates new evidence on price setting practices and inflation persistence in the euro area with respect to its implications for macro modelling. It argues that several of the most commonly used assumptions in micro-founded macro models are seriously challenged by the new findings.

In monetary unions, monetary policy is typically made by delegates of the member countries. This procedure raises the possibility of strategic delegation- that countries may choose the types of delegates to influence outcomes in their favor. We show that without commitment in monetary policy,...

A generalized rise in unemployment rates for both college and high-school graduates, a widening education wage premium, and a sharp increase in college education participation are characteristic features of the transformations observed in the U.S. labor market between 1970 and 1990. This paper...

Finance is important for development, yet the onset of modern economic growth in Britain lagged the British financial revolution by over a century. We present evidence from a new West-End London private bank to explain this delay. Hoare's Bank loaned primarily to a highly select and well-born...

This paper presents a stylized model of economic growth with bubbles. This model views asset price bubbles as a market-generated device to moderate the effects of frictions in financial markets, improving the allocation of investments and raising the capital stock and welfare. The model...

We study the effects of nominal debt on the optimal sequential choice of monetary policy. When the stock of debt is nominal, the incentive to generate unanticipated inflation increases the cost of the outstanding debt even if no unanticipated inflation episodes occur in equilibrium. Without full...

The goal of this paper is to study the effects of globalization on the workings of asset markets and welfare. To do this, we adopt a "technological" view of the globalization process. That is, we model this process as consisting of a gradual (and exogenous) reduction in the costs of shipping...

This paper offers empirical evidence that a country's choice of exchange rate regime can have a significant impact on its medium-term rate of productivity growth. Moreover, the impact depends critically on the country's level of financial development, its degree of market regulation, and its...