A price dispersion equation is tested with data from the German hyperinflation. The equation is derived from a version of Lucas's and Barro's partial information-localized market models. In this extension, different excess demand elasticities across commodities imply a testable dispersion equation, in which the explanatory variable is the magnitude of the unperceived money growth. In order to test this hypothesis a price dispersion series is constructed, and a measure of the unperceived part of money growth is estimated. The model receives support from the empirical analysis, although it is evident that unincluded variables have important effects on price dispersion.

This paper is an attempt to contribute to the integration of business-cycle analysis with long-term growth. A real-business-cycle model with endogenous growth is developed and estimated with U.S. data. In the present framework, wage movements do not have to be transitory to generate fluctuations in labor effort. The reduced form is a constrained bivariate output/hours (or real-wage/hours) vector autoregressive process. The bivariate setup provides a useful framework for analyzing the persistence of output fluctuations, given that the theory implies that hours of work contain information about future output movement. Copyright 1991 by American Economic Association.

This paper studies the role of business cycles in the phenomenon of increasing government-spending/GDP ratios in the OECD countries. An empirical framework that includes both long-run and cyclical considerations in the determination of government spending is applied to panel data covering 1975–1998. The main finding is that the prolonged rise in the spending/GDP ratio is partially explained by cyclical upward ratcheting due to asymmetric fiscal behavior: the ratio increases during recessions and is only partially reduced in expansions. The long-run ratcheting effect is estimated as approximately 2% of GDP. Also analyzed are the cyclical changes in the composition of government spending (government consumption, transfers and subsidies, and capital expenditure), as well as a possible link between cyclical ratcheting and government weakness.

A Beckerian model of household production is developed to study the cyclical allocation of capital and time between market and home activities. The adopted framework treats the business and household sectors symmetrically. In the market, labor interacts with business capital to produce market goods and services, and likewise at home the remaining time (leisure) is combined with household capital to produce home goods and services. The model presented is parameterized and simulated to see whether it can rationalize the observed allocation of capital and time, as well as other stylized facts, for the postwar U.S. economy.