The paper extends Dornbusch's analysis of exchange rate dynamics to include the case where changes in government policy are anticipated before they occur. It is demonstrated that simply the announcement of an expansionary policy will cause the exchange rate to jump, which induces an expansionary impact on the economy even before the policy is implemented.

The paper extends Dornbusch's analysis of exchange rate dynamics to include the case where changes in government policy are anticipated before they occur. It is demonstrated that simply the announcement of an expansionary policy will cause the exchange rate to jump, which induces an expansionary impact on the economy even before the policy is implemented.

Two alternative theories, each generating a "national defense argument" for protectionism, are developed and tested. The theory surviving the tests states that wartime price controls imply an undervaluation of peacetime stocks of capital which produce the war-controlled outputs. Optimal policy responses to these undervaluations are derived. For example: Nonimported, undervalued capital goods should receive domestic subsidies; undervalued capital goods, imported in peacetime but not in wartime, should receive import protection; and undervalued capital goods which are imported in wartime should be granted cartel status. An application to the United States indicates that the theoretical optimum is approximated by observed policy.

This paper examines the statistical relationship between devaluation and both the trade balance and the balance of payments for 16 devaluations of 14 countries in the 1960s. Using several tests involving both the seemingly unrelated and pooled cross-section time-series regression techniques, the paper tests the effect of devaluation while standardizing for other variables that may affect the foreign accounts. While the balance of payments does seem to improve following devaluation, no evidence is found to support the hypothesis that devaluation improves the trade balance. The paper concludes that the adjustment to devaluation is essentially monetary in nature, involving only a portfolio stock adjustment.

Two alternative theories, each generating a "national defense argument" for protectionism, are developed and tested. The theory surviving the tests states that wartime price controls imply an undervaluation of peacetime stocks of capital which produce the war-controlled outputs. Optimal policy responses to these undervaluations are derived. For example: Nonimported, undervalued capital goods should receive domestic subsidies; undervalued capital goods, imported in peacetime but not in wartime, should receive import protection; and undervalued capital goods which are imported in wartime should be granted cartel status. An application to the United States indicates that the theoretical optimum is approximated by observed policy.

This paper examines the statistical relationship between devaluation and both the trade balance and the balance of payments for 16 devaluations of 14 countries in the 1960s. Using several tests involving both the seemingly unrelated and pooled cross-section time-series regression techniques, the paper tests the effect of devaluation while standardizing for other variables that may affect the foreign accounts. While the balance of payments does seem to improve following devaluation, no evidence is found to support the hypothesis that devaluation improves the trade balance. The paper concludes that the adjustment to devaluation is essentially monetary in nature, involving only a portfolio stock adjustment.

Labor allocation and wage-scale formation are studied in the context of competitive hierarchic firms. We show that (1) the wage per effective laborer and his quality increase with the hierarchical position of the employee, and (2) up to a point, the imposition of a minimum wage for production labor increases the quality and quantity of production workers and reduces the wage, quality, and number of supervisors. These results help to explain the skewness of income distribution, and the wage differentials across layers which are inexplicable in terms of differences in labor quality and difficulty of tasks.

Labor allocation and wage-scale formation are studied in the context of competitive hierarchic firms. We show that (1) the wage per effective laborer and his quality increase with the hierarchical position of the employee, and (2) up to a point, the imposition of a minimum wage for production labor increases the quality and quantity of production workers and reduces the wage, quality, and number of supervisors. These results help to explain the skewness of income distribution, and the wage differentials across layers which are inexplicable in terms of differences in labor quality and difficulty of tasks.