We introduce time-dependent rewards into a general framework for analyzing innovative activity among firms with sunk costs of R&D. When firms are identical, innovation is delayed by an increase in the number of firms or a decrease in the size of the reward. When one firm has higher profit...

In the last decade or so, disciples of Piero Sraffa have propagated a particular interpretation of classical economics, according to which the classical economists focussed on the 'core' of their analysis on the determination of relative prices in long-run equilibrium, taking as given the volume...

A number of financial variables have been shown to be effective in explaining the time-series of aggregate returns in both the UK and US equity markets. These include, inter alia, the dividend yield, the spread between the yields on long and on short bonds, and lagged equity returns. Recently,...

We show that the bias of estimated parameters in autoregressive models can increase as the sample size grows. This unusual result is due to the effect of the initial sample observations that are typically neglected in theoretical asymptotoc analysis, in spite of their empirical relevance....

With the adoption of an explicit inflation target in the UK, there has been renewed interest in the properties of alternative feedback rules for interest rates based on an inflation target. In this paper we compare the stabilisation properties of the two forms of feedback rule that have been...

This paper tests Barro's (1979) tax smoothing model of fiscal policy. The model implies that budget deficits and surpluses are used optimally to minimise the distortionary effects of taxation, given a certain path of spending. The theory has a number of implications both for the statistical time...

We formulate a way to study whether the asymmetry of buyers (in the sense of having different prior probability distributions of valuations) is helpful to the seller in private-value auctions (asked first by Cantillon [2001]). In our proposed formulation, this question corresponds to two...

Testing for cointegration is now widespread in economics. Although the principle is sound, the practice has not always been so. In this note, an attempt is made to reveal flaws in some applied testing procedures. Incomplete nonstationary-null procedures make cointegration seem more likely than...

Contrary to the predictions of the rational expectations hypothesis of the term structure, empirical evidence suggest that the term spread between long and short rates fails to forecast future long term rates although its forecasts of future short term rates are in the correct direction. This...

In 1909 Parker Smith showed that the ratio of seats won by the two major parties in Britain was close to the cube of the ratio of their votes. Taagepera and Shugart argue, wrongly, that a fractal electoral map implies this. In fact their premises imply that the seats’ ratio will be the...