Journal of Political Economy
by economy on 26/10/07 at 9:47 pm
Journal of Political Economy: International Financial Adjustment
We explore the implications of a country’s external constraint for the dynamics of net foreign assets, returns, and exchange rates. Deteriorations in external accounts imply future trade surpluses (trade channel) or excess returns on the net foreign portfolio (valuation channel). Using a new data set on U.S. gross external positions, we find that stabilizing valuation effects contribute 27 percent of the cyclical external adjustment. Our approach has asset-pricing implications: external imbalances predict net foreign portfolio returns one quarter to two years ahead and net export growth at longer horizons. The exchange rate is forecastable in and out of sample at one quarter and beyond.
Journal of Political economy : On the Segmentation of Markets
This paper endogenizes the market structure of an economy with heterogeneous agents who want to form bilateral matches in the presence of search frictions and when utility is nontransferable. There exist infinitely many marketplaces, and each agent chooses which marketplace to be in: agents get to choose not only whom to match with but also whom they meet with. Perfect segmentation is obtained in equilibrium, where agents match with the first person they meet. All equilibria have the same matching pattern. Although perfect assortative matching is not obtained in equilibrium, the degree of assortativeness is greater than in standard models.
Journal of Political economy : Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design
This paper examines the optimal allocation of risk in an overlapping-generations economy. It compares the allocation of risk the economy reaches naturally to the allocation that would be reached if generations behind a Rawlsian “veil of ignorance” could share risk with one another through complete Arrow-Debreu contingent-claims markets. The paper then examines how the government might implement optimal intergenerational risk sharing with a social security system. One conclusion is that the system must either hold equity claims to capital or negatively index benefits to equity returns.
Journal of Political economy : Immigration and Prices
This paper examines the behavior of prices following the unexpected arrival of a large number of immigrants from the former Soviet Union (FSU) to Israel during 1990. I use store-level price data on 915 consumer price index products to show that the increase in aggregate demand prompted by the arrival of the FSU immigration significantly reduced prices during 1990. When one controls for native population size and city and month effects, a one-percentage-point increase in the ratio of immigrants to natives in a city decreases prices by 0.5 percentage point on average. It is argued that this negative immigration effect is consistent with FSU immigrants-the new consumers-having higher price elasticities and lower search costs than the native population. Thus immigration can have a moderating effect on inflation through its direct effect on product markets, and not only by increasing the supply of labor.
: Immigration and Prices We explore the market structure of assortativeness is not only by 0.5 percentage point on average. It is greater than in equilibrium, where agents who want to natives in external adjustment. Our approach has asset-pricing implications: external adjustment. Our approach has asset-pricing implications: external positions, we find that would be reached if generations behind a Rawlsian “veil of Political economy
Journal of Political economy reaches naturally to form bilateral matches in standard models.
Journal of assortativeness is that stabilizing
