Though not conceived as a constant, the natural unemployment rate was taken to be invariant to supply shocks until the late seventies and to real demand shocks until now. The largely micro-theoretic model here is one in a series deriving the natural rate path from general equilibrium. In this model the labor market exhibits generalized real-wage rigidity, resulting from the use of "incentive wages" to combat shirking, and the asset backing shares is the firms' customers, arising from customer-market friction. One finding is that increased consumer demand drives up the natural rate by driving real interest rates up.

A recent article by Bernanke [1984] tests the rational expectations-permanent income hypothesis using panel data on automobile expenditures. He finds no evidence refuting the hypothesis. This paper incorporates a threshold adjustment process into Bernanke's model. Estimations based on a subset of the data used by Bernanke reveal evidence that resale market imperfections and credit market constraints have important effects on automobile expenditures.

Journal Article The Enforcement of Equal Opportunity Laws Under Imperfect Information: Affirmative Action and Alternatives Get access Shelly J. Lundberg Shelly J. Lundberg University of Washington Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 106, Issue 1, February 1991, Pages 309–326, https://doi.org/10.2307/2937919 Published: 01 February 1991

Formulates a stochastic dynamic model of fertility to evaluate the assumptions that underlie the widely used econometric tests for parental sex preferences. Unlike previous work on dynamic models of fertility, several tractable and testable predictions are established. It is shown rigorously that conventional econometric tests using fertility data are valid tests for sex preferences; however, they cannot separate son preference from daughter preference. The only definite conclusion that one can draw from fertility data is whether there are sex preferences. These results call into question the validity of conventional econometric tests for son preference. -Author

This paper provides empirical evidence on the information in the term structure for longer maturities about both future inflation and the term structure of real interest rates. The evidence indicates that there is substantial information in the longer maturity term structure about future inflation: the slope of the term structure does have a great deal of predictive power for future changes in inflation. On the other hand, at the longer maturities, the term structure of nominal interest rates contains very little information about the term structure of real interest rates. These results are strikingly different from those found for very short-term maturities, six months or less, in previous work. For maturities of six months or less, the term structure contains no information about the future path of inflation, but it does contain a great deal of information about the term structure of real interest rates. The evidence in this paper does indicate that, at longer maturities, the term structure of interest rates can be used to help assess future inflationary pressures: when the slope of the term structure steepens, it is an indication that the inflation rate will rise in the future and when the slope falls, it is an indication that the inflation rate will fall. However, we must still remain cautious about using the evidence presented here to advocate that the Federal Reserve should target on the term structure in conducting monetary policy. A change in Federal Reserve operating procedures which focuses on the term structure may well cause the relationship between the term structure and future inflation to shift, with the result that the term structure no longer remains an accurate guide to the path of future inflation. If this were to occur, Federal Reserve monetary policy could go far astray by focusing on the term structure of interest rates.

This paper extends the Romer-Rosenthal [1978, 1979] model of monopoly agenda control to an environment where only the agenda setter knows with certainty the outcome associated with a failed proposal. The presence of this asymmetric information implies that any "take-it-or-leave-it" proposal may provide information crucial to the decision calculus of the voters, a fact which an optimal proposal strategy will incorporate. The equilibrium behavior of the agenda setter and voters is characterized and contrasted with that in the complete information environment, and a number of empirical predictions concerning the nature of elections with monopoly controlled agendas are derived.

This paper considers whether short-period deterministic cycles can exist in a class of stationary overlapping generations models with long- (but finite-) lived agents. It shows that if agents discount the future positively, then as life spans get large, nonmonetary cycles will disappear. Further, neither constant monetary steady states nor stationary monetary cycles can exist. It also shows that if agents discount the future negatively, then there are robust examples in which constant monetary steady states as well as stationary monetary cycles (with undiminished amplitude) can occur no matter how long agents live.

The production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong. Yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework, but actually to argue that the basic idea of production smoothing is all wrong. Most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales. This paper first documents the stylized facts. Then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts. Finally, it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions.

This paper describes a methodology for measuring the frequency of price change in order to test the relevance of assuming prices to be set for discrete periods of time at overlapping intervals. Taylor [1980] has related the frequency of adjustment to the rigidity of the economy in responding to unanticipated events. Estimates of the frequency of price change are computed from data on the component parts of the deflator for personal consumption expenditure. The results show a substantial decrease in the period between price changes during the middle 1960s, and marked fluctuations in the 1970s. The movements suggest changes in the rigidity associated with both changes in general price inflation and changes in the posture of the fiscal and monetary authorities.

Several recent papers have tested the permanent income-cum-rational expectations hypothesis using data on nondurable or semidurable consumption. We show how this approach can be extended to the case of durables. An application to panel data on automobile expenditures reveals no evidence against the permanent income hypothesis. This result is unchanged in subsamples segregated by family holdings of liquid assets.