Ever since the development of the Autoregressive Conditional Heteroskedasticity (ARCH) model (Engle [1982]), testing for the presence of ARCH has become a routine diagnostic. One popular method of testing for ARCH is T times the R^2 from a regression of squared residuals on p of its lags. This...

We study monetary and exchange-rate policies around successful and unsuccessful fiscal adjustments and find that successful adjustments are preceded by large nominal exchange rate depreciations, whereas unsuccessful adjustments are preceded by appreciations. Pre-adjustment depreciation is a...

Under conditions of risk neutrality and rational expectations in the foreign exchange market, there should be a one-to-one relationship between the forward rate and the corresponding future spot rate. However, cointegration-based tests of the unbiasedness hypothesis of the forward rate have...

In this paper we hypothesize that greater macroeconomic uncertainty would cause firms to increasingly turn to their suppliers as a source of finance, making greater use of trade credit. We test this hypothesis using a panel of non-financial firms drawn from the annual COMPUSTAT database and show...

It is often argued that monetary instability reduces the informational content of market signals and thereby hinders the efficient allocation of investment. In this paper we use a signal extraction framework to give empirical content to this idea. In particular, we show why this framework...

In cash-in-advance models, necessary and sufficient conditions for the existence of an equilibrium with zero nominal interest rates and Pareto optimal allocations place restrictions only on the very long-run, or asymptotic, behavior of the money supply. When these asymptotic conditions are...

International trade policies are often compared across countries and over time for a variety of purposes. Analysts use such measures as arithmetic or trade-weighted average tariffs, Non-Tariff Barrier (NTB) coverage ratios and measures of tariff dispersion. All such measures are without...

We study the implications of honesty when it requires pre-commitment. Within a two-period hidden information problem, an agent learns his match with the assigned task in period 2 and, if honest, reveals it to the principal if he has committed to it. The principal may offer a menu of contracts to...

This paper studies the usefulness of advertising to both consumers and experts in specialized markets like the prescription drugs, travel and real-estate markets where the consumers' purchasing decisions are influenced by the experts (e.g., doctors, travel agents and real-estate agents)....

We develop a stochastic, general equilibrium, two-country model of trade and macroeconomic dynamics. Productivity differs across individual, monopolistically competitive firms in each country. Firms face a sunk entry cost in the domestic market and both fixed and per-unit export costs. Only...