It is currently popular to identify monetary policy shocks with innovations in some measure of reserves or in the federal funds rate. These assumptions about the interest elasticity of the supply of or demand for reserves imply monetary policy shocks that produce dynamic responses of macroeconomic variables that are anomalous relative to traditional monetary analyses. This paper tentatively identifies supply and demand shocks in the markets for reserves and M2 for the 1980s and contrasts them with results for the 1970s. In the later period, identified monetary policy shocks have dynamic impacts that are fully consistent with traditional analyses.

Selection dynamics are often used to distinguish stable and unstable equilibria. This is particularly useful when multiple equilibria prevent a priori comparative static analysis. This paper reports an experiment designed to compare the accuracy of the myopic best-response dynamic and an inertial selection dynamic. The inertial selection dynamic makes more accurate predictions about the observed mutual best-response outcomes.

This paper tests the conjecture that the divergence of willingness to pay (WTP) and willingness to accept (WTA) for identical goods is driven by the degree of substitution between goods. In contrast to well-known results for market goods with close substitutes (i.e., candy bars and coffee mugs), our results indicate a convergence of WTP and WTA measures of value. However, for a nonmarket good with imperfect substitutes (i.e., reduced health risk), the divergence of WTP and WTA value measures is persistent, even with repeated market participation and full information on the nature of the good.

This article examines the effect of tax factors on the equity values of U.S. multinational corporations making foreign acquisitions. Abnormal stock returns are found to be related to a tax variable that captures differences in the international tax status of acquiring firms but not related to a naive tax variable that captures differences between tax rates in target countries and the United States. Our evidence suggests that aggregate intercountry differentials in after-tax returns are competed away, while firm-specific, tax-related advantages (or disadvantages) are reflected in abnormal returns around the announcement date of the acquisition.