The path of the dollar has significantly influenced investment activity in U.S. industry. The effects of both exchange-rate levels and exchange-rate volatility have been more pronounced in the 1980s than in the 1970s. Although aggregate investment data mask some of these relationships, the effects of exchange rates on investment are most pronounced in the disaggregate data for manufacturing durable goods sectors and nonmanufacturing sectors. These relationships also have changed over time. In contrast to the conventional wisdom, in the 1980s real dollar depreciations (appreciations) were likely to be associated with investment contractions (expansions).

The literature on the Fisher effect has ignored the potential relationship between inflation and long-term interest rates. Using an expectations model of the term structure of interest rates, the authors establish the conditions under which innovations in short-term inflation will be transmitted to long-term as well as short-term interest rates. Cointegration tests find support for both the Fisher effect and the expectations theory of the term structure.

While the divestiture of AT&T was intended to produce benefits in the long-distance market, the evidence suggests it has created an unexpected side benefit in local telephone markets. The authors' results show that local exchange carriers have realized immediate cost savings in responding to competitive pressures since the breakup, with the baby Bells experiencing generally larger gains. Dynamically, these productivity gains have increased over time at a relatively constant rate. Although gains of 3-5 percent of total cost are not that large, the absolutely large costs of telephone companies imply significant cost savings of nearly $72 million for the representative firm.

Maxwell L. King, Thomas S. Shively, Locally Optimal Testing When a Nuisance Parameter is Present Only Under the Alternative, The Review of Economics and Statistics, Vol. 75, No. 1 (Feb., 1993), pp. 1-7

This paper uses a two-step methodology to examine the relationship between firm inefficiency and the regulatory closure of savings and loans (S&Ls). In the first step, using multiproduct, translog stochastic cost frontiers, the authors estimate inefficiency scores separately for mutual and stock S&Ls operating in the Southwest in 1988. They use the inefficiency scores in second step logit models to identify determinants of regulatory closure. For both mutual and stock S&Ls, the authors find a significant positive relationship between firm inefficiency and regulatory closure. They also find a greater probability of closure for S&Ls in economically depressed states.

This paper analyzes the impact of macroeconomic activity on the level of poverty in the U.S. economy. The authors us e a macroeconometric model of poverty in the United States where the rat e of poverty is presumed to depend upon changes in various indicators of macroeconomic performance and policy. The authors empirically model the relationship between poverty and the macroeconomy with a hybrid mode l that employs a reduced-form model to capture the dynamic interaction s among the data and a structural economic model to describe the contemporaneous relationship between the variables.

Joseph A. Herriges, S. Mostafa Baladi, Douglas W. Caves, Bernard F. Neenan, The Response of Industrial Customers to Electric Rates Based Upon Dynamic Marginal Costs, The Review of Economics and Statistics, Vol. 75, No. 3 (Aug., 1993), pp. 446-454

Hamid Beladi, Munit A. S. Choudhary, Amar K. Parai, Rational and Adaptive Expectations in the Present Value Model of Hyperinflation, The Review of Economics and Statistics, Vol. 75, No. 3 (Aug., 1993), pp. 511-514

In this paper the authors have theoretically derived a net migration equation and estimated it using time-series data for 51 regions over the period 1971-88. The results indicate that the dynamic response of net migration is stable and is significantly related to stock equilibrium changes induced by amenity differentials, relative employment opportunities, relative real wages, and industry composition. Moreover, the explicit linkage of stock equilibrium to stable dynamic flows in the model ensures that any stock disequilibrium will generate a finite migration response sufficient to attain a new stock equilibrium. The estimated parameters determine the speed at which net migration re-establishes stock equilibrium. Coauthors are Dan S. Rickman, Gary L. Hunt, and Michael J. Greenwood.

Neil Bania, Randall W. Eberts, Michael S. Fogarty, Universities and the Startup of New Companies: Can We Generalize from Route 128 and Silicon Valley?, The Review of Economics and Statistics, Vol. 75, No. 4 (Nov., 1993), pp. 761-766