This paper examines the effects of the Federal Trade Commission's Advertising Substantiation Program, developed in the early 1970s. This program coupled changes in the legal definition of deception with more vigorous FTC enforcement. We analyze changes in advertising intensity, media choice, media wealth, and the progress of new entrants. The evidence suggests that adoption of substantiation requirements increased the credibility of advertising.

We investigate the pass-through from exchange rates to import prices when firms' future demands depend on current market shares. Foreign firms may either raise or lower their dollar export prices when the dollar appreciates temporarily (i.e., the pass-through may be perverse) and import prices may be more sensitive to expected future than to current exchange rates. We explore whether expected future exchange rates provide a clue to the puzzling recent behavior of U.S. import prices.

Money is incorporated into a real business cycle model using a cash-in-advance constraint. The model economy is used to analyze whether the business cycle is different in high inflation and low inflation economies and to analyze the impact of variability in the growth rate of money. In addition, the welfare cost of the inflation tax is measured and the steady-state properties of high and low inflation economies are compared.

William Kaempfer and Anton Lowenberg (in this Review, September 1988) have developed an engaging model of the sanctions process grounded public choice. They identify potentially influential private forces that might affect the nature of a sanctions package. While the spirit of their effort is laudable, the model fails to incorporate some absolutely essential information about the legal, institutional, and strategic framework which sanctions decisions are made. As a consequence they reach a conclusion that flies the face of existing facts. Contrary to what is suggested by Kaempfer and Lowenberg (KL), and contrary to the implications of their model, the evidence clearly indicates there is an unequivocal bias against the use of import restrictions favor of export controls. The recent history of economic sanctions shows that only somewhat more than one-third of sanction episodes involved both export and import controls.' Further, Gary Hufbauer and Jeffrey Schott (1985) observe that, in instances where only one or the other is invoked, export controls are almost always preferred to restrictions on imports.2 An almost exclusive reliance on export controls economic foreign policy measures is particularly evident the actions of the United States the 1970s.3 The purpose of this comment is to explore the causes of this asymmetry. There are at least three reasons why export controls have been favored over import controls, reasons that play no part the KL model. First, the General Agreement on Tariffs and Trade (GATT) has institutionalized a bias against import favor of export controls. Second, the United States domestic legal constraints favor export controls and discourage import controls. Third, as will be argued, export controls are more easily reversed than import controls and reversibility is a desirable component any foreign-policy based intervention. Consider these points turn. In the 1946-1948 period, during which time the GATT was first negotiated, trade barriers were identified most often with those artificial impediments to that restrict foreign access to domestic markets, especially tariffs. For this reason, GATT rules and actions have sought primarily to dismantle import barriers. John Jackson (1969, p. 502) notes that despite the fact that extensive export controls do exist, there has been only one complaint with respect to such controls reflected GATT documents. This is the Czechoslovakian complaint against the United States... 1949 for the imposition of discriminatory export controls.4 Jackson (p. 502) observes that there is ... . very little, if any, effective GATT policing of export control policy. And he comments later (p. 539) that insofar as any GATT obligations can be avoided without consequences, this avoidance operates effect as an exception. This suggests that those foreign policy export controls that are pro*Department of Economics, University of Arizona, Tucson, AZ 85721. I thank Alan Deardorff, Bernard Hoekman, and Robert Stem for helpful discussions on work related to this note. My thanks also to two anonymous referees for their constructive comments. 'See p. 28 and Tables 4.1-4.5, pp. 70-77, Hufbauer and Schott (1985). 2Ibid., p. 28. 3See, for example, Richard Cooper (1987), pp. 301-302 and p. 305, and Kenneth Abbott (1981), p. 741. 4This is confirmed more recently by Barry Carter (1988, p. 97). The only other event involving export restrictions challenged before the GATT was the U.S. embargo against Nicaragua 1985 which involved both import and export restrictions.

This paper examines the effects of restrictions on international financial markets in a general-equilibrium, rational-expectations model of a two-country world. Taxes or quantitative controls on purchases of foreign currency and on the income from foreign assets reduce international trade in goods, lower ex post welfare in the country in which they are imposed, and affect nominal prices and exchange rate.

Contrary to the usual assumption made in most oligopoly models, relations among firms are seldom of a wholly cooperative or noncooperative type: in many situations, they compete in some fields, while they cooperate in others. An important example is the case of cooperative research efforts bringing fierce competitors together. Two types of agreement are observed. First R&D cooperation can take place at the so-called “precompetitive stage”: companies share basic information and efforts in the R&D stage but remain rivals in the market-place.1 A second type of agreement involves an extended collusion between partners, creating common policies at the product level. The usual justifications of this extension are the difficulties of protecting intellectual property. The idea is then to allow partners who have achieved inventions together, to also control together the processes and products which embody the results of their collaboration, in order to recuperate jointly their R&D investments.2 What could be expected from these types of agreement is a reduction in R&D expenditures, because of less wasteful duplication, and a reduction of total production, because of more ∗Reprinted from The American Economic Review, 78(5), 1133-1137, 1988. †Center for Operations Research & Econometrics, 1348 Louvain-la-Neuve, Belgium. We are grateful to Jean

[This paper describes an environment in which government-issued currency is dominated in rate of return and in which there obtains a Modigliani-Miller theorem for government open market operations. Earlier Modigliani-Miller theorems for government finance have been stated for environments in which government-issued currency is not dominated in rate of return in equilibrium. Since government-issued currency is widely observed to be dominated in return, it is useful to study how Modigliani-Miller theorems hinge on absence of rate of return dominance.]