Knowledge that Transforms

This article provides quantitative estimates from an econometric model of the output, price, interest rate, and exchange rate linkages among a number of countries. The linkages are examined by changing various policy variables and observing the resulting changes in the endogenous variable. The model is also used to estimate what is called the "exchanging rate effect" on inflation. One of the ways in which monetary and fiscal policies may affect a country's inflation rate is by first influencing its exchange rate, which in turn influences import prices, which in turn influence domestic prices. The model allows this exchange rate effect on inflation to be estimated.

Analyzes the theory of tariffs in the revenue seeking perspective. Comparison between tariffs and quotas; Benefits of the premium seeking; Discussion on the tariff policy.

If prizes are to be awarded simultaneously at a specified time on a first-come- first-served basis, then individuals who queue for them will choose different waiting times through their arrivals at the queue. This choice of arrival time at a queue is similar to the choice of a sealed tender in an auction. An equilibrium for this "waiting-line auction" is obtained here using methods for analyzing sealed-tender auctions. When individuals are risk neutral it is shown that several alternative waiting-line allocation procedures result in the same transactions cost associated with waiting in line.

This paper proposes directly unproductive, profit-seeking (DUP) activities as a general concept that embraces a wide range of recently analyzed economic activities, including the subset of rent-seeking activities considered by Krueger. It then proceeds to provide a synthesis and generalization of the welfare-theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the DUP activity. Thus a unification and overview of the subject are achieved. In this paper, I begin in Section I by briefly discussing the common, unifying essence of the phenomena so analyzed and then arguing why they are best described as directly unproductive, profit-seeking (DUP) activities. Next, I proceed in Section II to differentiate analytically among different types of such activities, with a view of classifying them into categories which are analytically meaningful from the view-point of their welfare impact. Existing analyses of specific problems, such as tariff seeking and revenue seeking, are then readily identified in Section III as belonging to one such category or another, and the welfare consequences demonstrated in these analyses are then shown to be only specific illustrations of a wider class of DUP activities with identical welfare consequences.

It has often been argued that prices are sticky in the United States. However, the empirical papers that have claimed to support this view have not reflected any formal behavioral theory. This paper presents a theory that justifies price stickiness, namely, that firms, fearing to upset their customers, attribute a cost to price changes. The rational expectations equilibrium of an economy with many such firms is presented, estimated with postwar U.S. data, and tested against alternative hypotheses. The results largely support the model. Furthermore, the hypothesis that prices are not sticky is rejected by U.S. data.