A MONG THE BIG unsettled questions of modrem history and economic history, four loom large-the industrial revolution, the French revolution, the German inflation of the 1920s, and the world depression of the 1930s. All are still studied, debated giving rise to many theories, mostly mono-causal and conflicting. More unsettled questions may be on the way, for example the inflation of the 1980s and the stagnation of the early 1990s. But Gerald Feldman has written a big book that must be taken into account in any discussion of the German inflation, big in many senses, 1000 pages of double-column print (triple columns in the index), 4.48 pounds in weight at my local supermarket, and covering in the order of the subtitle the politics, economics, and sociology of this pathological episode. Specialists in any one discipline may find their own discipline relatively neglected, especially economists who tend to want more theory, as D. C. Coleman indicates, who asserts that theories are what economists make, while historians need evidence (1969, p. 8). The evidence here is prodigious: 49 tables, two-thirds that number of photographs and illustrations, 85 pages of endnotes, 24 pages of bibliography, and a 42-page index, the work of 15 years of study of the subject and 43 earlier publications of Feldman-books, articles, and edited work, some with colleagues, mostly his own. The feast is rich; some economists and economic historians may find it too rich for ready digestion. Feldman is aware of his problem in combining contradictory modes of analysis, but believes it necessary. Partly in a reaction to the work of Carl-Ludwig Holtfrerich whose The German Inflation, 1914-1923 (1986) concludes that the results of the inflation on balance were favorable in giving Germany years of investment and full employment in a largely depressed world and ridding it of private foreign and all internal debt, he asserts

Estimation and Inference in Econometrics, Russell Davidson and James G. MacKinnon, Oxford University Press, 1993, 874 + xx pages (Designated DM). A Course in Econometrics, Arthur S. Goldberger, Harvard University Press, 1991, 405 + xvii pages (Designated GO). Econometric Analysis, second edition, William H. Greene, Macmillan, New York, 1993, 791 + xxii pages (Designated GR). Learning and Practicing Econometrics, William E. Griffiths, R. Carter Hill, and George G. Judge, John Wiley, New York, 1993, 866 + xxv pages (Designated GHJ).

We examine the lead–lag relation between intraday spot and futures prices for a stock index where the component stocks are floor traded while the futures contract is screen traded. We find that futures prices lead spot prices by nearly 20 min. This is much longer than in markets where both the index and index futures are floor traded. We show that this lead–lag relation is unlikely to be an artifact of differences in liquidity between the spot and futures markets. These results are consistent with the hypothesis that screen trading accelerates the price discovery process. Journal of Economic Literature Classification Numbers: F33, G15, G20, O31.

This paper analyzes a simple mobility-based model of mortgage lending and uses the results to illuminate the issue of mortgage points. The model predicts the points/interest-rate trade-off observed in the market, and it also predicts that mobile borrowers choose low-points/high-rate contracts from the available menu, in conformance with conventional wisdom. These outcomes are shown to be a result of adverse selection, which arises because of the lender′s inability to distinguish the mobility characteristics of borrowers. Empirical evidence is also presented showing the presence of a points/interest-rate trade-off in the market. In addition, relying on a proxy variable, the results establish that borrowers choose contracts from this menu according to mobility. Journal of Economic Literature Classification Numbers: G21

According to conventional theory, insurance premiums should be informationally efficient predictors of the present value of policy claims and expenses. This paper develops an alternative theory of insurance market dynamics based on two assumptions. First, insured risks are dependent. Under this assumption, insurers′ net worth determines the market capacity since it is necessary to back the contractual promises to pay claims. Second, in raising net worth, external equity is more costly than internal equity. The theory explains the variation in premiums and insurance contracts over the "insurance cycle" and is supported by tests on postwar data. Journal of Economic Literature Classification Numbers: G1, G22

This paper examines the change in trading costs for firms that choose to move from a dealer market to a specialist system. Using transactions data, our empirical results reveal structurally induced average trading cost reductions of 4.7 (5.2) cents per share for firms that moved from the NASDAQ/NMS to the NYSE (AMEX) in 1990. For NYSE listed stocks, the trading cost reductions are equally divided between quote improvements and the routing of trades to the NYSE. Trading cost improvements vary inversely with trade sizes and positively with dollar spreads. Finally, the greatest liquidity benefits from listing accrue to the less liquid stocks. Journal of Economic Literature Classification Numbers: D40, G12, G20

This paper considers the extent to which loan commitments mitigate the problems of information monopolies that arise when the firm contracts with a private lender. Loan commitments in conjunction with short-term debt often provide the firm with superior investment incentives by influencing both the states in which bargaining occurs as well as the outcomes from bargaining. Commitment contracts are particularly valuable when there is a high likelihood that information about the firm will be publicly revealed ex post. We also identify circumstances under which the firm foregoes commitment financing, relying on short-term debt instead. Journal of Economic Literature Classification Numbers G21, G32, D82

This paper demonstrates how managers with private information about firms′ exposure to risk may, in the best interest of shareholders, engage in speculation instead of hedging as the conventional wisdom tells us. The reason is that when profits serve as a signal of firms′ values, speculative trades can be used to distort profits and hence manipulate stock prices to the shareholders′ advantage. A consequence of such corporate speculation is that stock prices become less informative about firms′ true worth. Journal of Economic Literature Classification Numbers: D82, G14, G32

This paper considers the costs and benefits of inflation using a stochastic version of Townsend′s turnpike model in which agents of each type are allowed to remain at a trading post for multiple periods. Numerical results show that moderate rates of inflation can be welfare-improving, but only when private credit markets are extremely limited. More generally, the existence of private credit markets curtails the ability of inflationary policy to do both harm and good. In addition, the welfare consequences of inflation depend on how much information about the economy the government has access to when implementing its policies. Journal of Economic Literature Classification Numbers: D52, E31