This study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities. The theory demonstrates that if the amenity is also productive, then the sign of the wage gradient is unclear while the rent gradient is positive. The theory is extended to include the housing market and nontraded goods. These extensions require little modification of the conclusion. The empirical work on wages shows that the regional wage differences can be explained largely by these local attributes. With the use of site price data, implicit prices are estimated and quality of life rankings for the cities are computed

In countries with high rates of inflation there is typically movement away from the use of the local currency. The paper analyzes the costs and benefits of using a local currency, with emphasis on the seigniorage foregone by using a foreign money. Even if it should be desirable for a country to fix its exchange rate, it still loses seigniorage if it does not use its own money. The case for using a foreign money then turns largely on the superior discipline imposed on domestic policymakers by removing their control over the money supply. Alternative methods of imposing discipline are discussed. Estimates of the amount of seigniorage raised by different governments are presented; seigniorage amounts in some cases to about 10 percent of government revenue. Estimates are also presented of both the annual flow and one-time stock costs of giving up use of domestic currencies and instead using the dollar. The flow cost is typically about 1 percent of GNP and the stock cost is around 10 percent of GNP

Two competing monetary policy prescriptions are analyzed within the context of overlapping generations models. The real-bills prescription is for unfettered private intermediation or central bank operations designed to produce the effects of such intermediation. The quantity-theory prescription, in contrast, is for restrictions on private intermediation designed to separate "money" from credit. Although our models are consistent with quantity-theory predictions about money supply and price-level behavior under these two policy prescriptions, the models imply that the quantity-theory prescription is not Pareto optimal and the real-bills prescription is.

A heated debate has arisen over the policy ineffectiveness proposition associate with the work of Lucas, Sargent, and Wallace. It postulates that anticipated aggregate demand policy will have no effect on business-cycle fluctuations, so that one deterministic, feedback policy rule is as good as any other from the point of view of stabilizing the economy. This paper develops a methodology for empirically analyzing rational-expectations models displaying this neutrality result and then applies it to the important question of whether anticipated monetary policy matters to the business cycle

Equilibrium is analyzed for a simple barter model with identical risk-neutral agents where trade is coordinated by a stochastic matching process. It is shown that there are multiple steady-state rational expectations equilibria, with all non-corner solution equilibria inefficient. This implies that an economy with this type of trade friction does not have a unique natural rate of unemployment.

Nominal wages have less variation about a trend than the money supply does, and the variation is more persistent. This inertia in the nominal wage is often cited as the principal source of stagflation. This paper explains the phenomenon by appealing to temporary wage inflexibility in an environment where agents cannot directly disentangle permanent versus transitory movements in key state variables. A wage equation results that is a distributed lag of previous values of the state variables, including money. Nominal wage variation becomes less sensitive to the money supply as agents' ability to detect the permanent evolution of the money supply declines

Exchange-rate rules that link exchange depreciation to domestic price-level changes are shown to affect the output price-level stability trade-off through two separate channels. On one hand a PPP-oriented exchange-rate policy tends to maintain constant the real exchange rate, thus stabilizing demand. But the exchange-rate policy works also through the supply side, via the prices of imported intermediate goods. Here exchange-rate indexation works to amplify the effect of wage disturbances on prices and potentially on output. In the context of a rational-expectations model with long-term overlapping wage contracts, the analysis shows that the impact of increased indexation on output and price-level stability depends on the extent of monetary accommodation

This paper develops a general preference model for analyzing parental allocations of resources among their progeny. The implications fro this model for the distribution of educational resources and earnings potentials among siblings are examined. A particular version of the preference model is estimated using data on the education and earnings of adult male twins. The estimates imply that parents care about offsprings' earnings inequality and provide more (less) resources to the less (more) able than is consistent with an investment model

A simple stochastic model is developed which demonstrates that information on the nominal value of money conveys sufficient information about the disturbance to currency and deposit demand so that monetary prices, such as adjusting the level of bank reserves, have no impact on the dispersion of price level forecast errors. However, if information on monetary aggregates is obtained only with a lag, then reserve requirements can reduce the disturbances to the demand for high-powered money and hence prices. Such a reserve ratio depends critically on the variance-covariance matrix of shocks to the monetary demands.