Real exchange rates between the United States and its major trading partners were calculated for the Bretton Woods and flexible exchange rate periods. Unit root tests indicate that Purchasing Power Parity performed poorly in both periods. Tests for cointegration reveal limited instances in which it is possible to estimate the deviations from PPP as an error correcting model. The estimated error correcting models indicate that foreign, but not U.S., prices responded to deviations from PPP. Frenkel's (1981b) finding that Purchasing Power Parity (PPP) worked better during the 1920s than the 1970s caused considerable controversy. For example, Davutyan and Pippenger (1985) contend that the socalled collapse of PPP is a result of an increase in the relative importance of real versus monetary shocks. They argue that the 1970s, as opposed to the 1920s, was characterized by real supply shocks and the international coordination of monetary policies. The argument is that PPP did not fail; rather, there was an increase in the volatility of those factors giving rise to deviations from PPP. Hakkio (1984) reestimated PPP over the 1920s and 1970s; using cross-country tests (i.e., SURE estimates) to improve the efficiency of his estimates, he was able to support the hypothesis that PPP worked better in the 1970s than in the 1920s. On the other hand, papers by Adler and Lehman (1983), Dornbusch (1980), Frenkel (1981a), Junge (1985), and Krugman (1978) report findings contrary to the PPP hypothesis. Moreover, Kenen and Rodrik (1986) find that the volatility of real exchange rates has increased throughout the flexible rate period. This paper tries to shed some light on the importance and persistence of the observed deviations from Purchasing Power Parity under alternative exchange rate systems. While it is interesting to compare PPP in the 1920s versus the 1970s, it is equally useful to compare the 1960s versus the 1970s and 1980s. If real supply shocks and lack of monetary coordination are characteristic of the latter period, PPP should perform better in the 1960s. To illustrate the issues involved, consider the following econometric model of (Relative) Purchasing Power

Conventional empirical studies of money neutrality have focussed on the response of aggregate economic measures to anticipated and unanticipated money supply shocks. The present paper uses data from the U.S. pork industry to test for money neutrality at the microeconomic level. The appeal of the pork industry stems largely from the homogeneity of the product we consider and the fact that the product is traded in what are essentially auction markets. We find that current unanticipated, but not anticipated, money supply shocks have real effects in the industry.

This paper reports the results of a survey regarding the instances of plagiarism reported by journal editors in the economics profession. The survey finds that nearly 24% of responding editors encounter one case of plagiarism in a typical year. In addition, the survey reveals that less than 19% of responding journals have a formal policy regarding plagiarism. Moreover, there is a great deal of variance in what is considered plagiarism and what an appropriate response to plagiarism should be. A majority of editors believe that the economics profession would benefit from a professional code of ethics.

The paper employs the intergenerational model to derive the demands for domestic and foreign currencies from microeconomic optimizing behavior. In the absence of government policy, we obtain the Kareken and Wallace result that exchange rates are constant and indeterminate. We discuss the reasons why nations may find it in their interests to impose probabilistic capital controls. It is shown that the imposition of probabilistic capital controls yields a unique (generally nonstationary) exchange rate path and that this path is determined in accord with the Monetary Approach. As the probability of controls tends to zero, the exchange rate remains determinate.

In spite of the common wisdom that poverty breeds terrorism, econometric tests usually find that terrorism is influenced by population and various measures of democratic freedom, but not per capita GDP. Unlike previous studies, we use a data set containing separate measures of domestic and transnational terrorism and estimate models allowing for a nonlinear relationship between terrorism and poverty. When we account for the nonlinearities in the data and distinguish between the two types of terrorist events, we find that poverty has as a very strong influence on domestic terrorism and a small, but significant, effect on transnational terrorism.

Although poverty research has a very long history in the social sciences, serious debate on the sufficiency of economic growth to eliminate poverty was rekindled by the inception of the “War on Poverty” by the Kennedy and Johnson Administrations during the early 1960s. Forty years later, the measurement of growth’s effect on poverty remains an important input to the policy question of whether, how much, and how govern ment efforts should address poverty reduction. Early work by Henry J. Aaron (1967) found that poverty among certain groups seemed highly sensitive to economic growth, while other groups were barely affected. Subsequent researchers have realized that poverty has a spa tial as well as a demographic dimension, and more recent work has examined poverty by “race and region” using disaggregated time series. The present study further refines the examination of poverty by racial/ethnic group and region by investigating the impact of economic progress on poverty across black, Hispanic, and white populations measured over 35 years at the level of the census region. To our knowledge, this is the first research to study all three of these groups using regional data. A regional analysis is important because the North, Midwest, South, and West have had different industrial structures and different economic histories over the last three decades. As shown in Figure 1, regional poverty rates of blacks and Hispanics relative to whites are quite different. Moreover, regional differences exist in the levels and growth rates of real per capital GDP, in the secular decline in manufac turing, and in the pattern of the unemployment rate. In addition to economic events, we control Non-White Poverty and Macroeconomy: The Impact of Growth

This paper develops a two-country micro-theoretic model consistent with the Ricardian equivalence hypothesis. Specifically, tax increases used to retire government debt will not affect private spending or the current account balance. However, increases in government spending, regardless of the means of finance, can be expected to induce a current account deficit. An unconstrained vector autoregression shows some patterns in the recent U.S. data that appear to be inconsistent with the Ricardian equivalence hypothesis. Rigorous testing of the model, however, does not allow the authors to reject the independence of the record federal government budget and current account deficits.

We investigate the information contained in the London Interbank Offered Rate (LIBOR) and the U.S. Constant Maturity Treasury (CMT) term structure of interest rates and report three novel findings. First, we document that the information contained in term structures are significantly different from one another. Second, we provide evidence of a significant change in the nature of this difference as the financial crisis began. Third, we find that the significant changes in the information content of CMT and LIBOR are consistent with significant shocks to credit default swap rates and tenor swap rates.