The author proposes an alternative to the traditional definition of the gains from international trade and, hence, an alternative defense of free trade. Rather than showing that free trade allows a country to consume more of all final goods, the author’s approach shows that free trade...

I analyze optimal fiscal policy choices in a continuous time endogenous growth model similar to Barro's. The government uses income taxes from representative 'rich' and 'poor' households to finance purchases of productive goods and to make transfer payments to poor households. Increases in...

This paper considers value functions for maximization problems where the objective function is maximized subject to several constraints. I show that such value functions exhibit diminishing marginal rates of substitution (MRS) between the resource endowments which define the constraints. For the...

We reconsider the out-of-sample forecasting ability of a large number of financial variables with respect to real output growth over the 1985:1--1999:4 period. We show that models including financial variables display almost no forecasting ability relative to an autoregressive benchmark model...

Previous studies argue that financial variables do not help forecast U.S. output growth. F statistics for excluding financial variables from output growth equations depend on the sample period and the inclusion of 1974:12 in the sample. Also, an autoregressive model of output growth often...