This paper proposes a model for optimizing the duration of transition under the assumption that the government main goal is to minimize the social cost of reforms. At the beginning of transition there are two main sectors in the economy: an old technology sector - mainly the public one - where...

We determine empirically how the Big Three automakers accommodate shocks to demand. They have the capability to change prices, alter labor inputs through temporary layoffs and overtime, or adjust inventories. These adjustments are interrelated, non-convex, and dynamic in nature. Combining weekly...

A number of explanations for the observed decline in GDP volatility since the mid-1980s have been offered. Valerie Ramey and Daniel Vine (2003a, 2003b) in a couple of recent papers offer the hypothesis that a decline in the persistence of sales is an explanation for the decline in GDP...

A recent empirical literature has shaken economists' confidence in the value of aggregate (industry-level) data to illuminate production relationships. But the statistical finding "you can't aggregate," however well documented, is not an economic explanation. Plant-level relationships do...

The stylized fact for economies experiencing financial crises, that slow economic reform is followed by persistent stagnation, is usually explained as follows: Forbearance policy (i.e., an implicit subsidy to inefficient sectors) distorts resource allocation and causes a supply shortage of...

Much research on the dynamics of the aggregate economy concerns the adjustment policy of the microeconomic units. This paper investigates the optimal adjustment policy when there are seasonal fluctuations and fixed adjustment costs. The optimal policy in this case can be described in terms of...

The two Cambridge controversy have marked a milestone in economic thinking. By their demonstration neo-Ricardian and post-Keynesian seemed to have proven the impossibility of defining the notion of Capital and, moreover, of being able to aggregate heterogeneous Capital. It is not so.By reasoning...

I estimate the elasticity of GDP with respect to aggregate capital and labor using industry-specific cost structures and without assuming an aggregate production function exists. Different assumptions about industry capital costs provide upper and lower bounds for the elasticities. In the U.S....

In this paper, we embed the microeconomic decisions associated with investment under uncertainty, capacity utilization, and machine replacement in a general equilibrium model based on putty-clay technology. We show that the combination of log-normally distributed idiosyncratic productivity...

Recent literature has shown that corporate indebtedness affects firm-level investment behavior but not necessarily aggregate business cycles. I argue that interactions among heterogeneous firms play an important role in equilibrium. After a downturn, financially unconstrained firms in...