sumer reliance upon advertising since these mechanisms substitute as sources of product/vendor information. One can predict, therefore, that when relative prices favor consumer reliance upon advertising as information, producers will respond accordingly. This prediction also received empirical verification-advertising intensity by sellers in the mobile Washington, D.C. area greatly exceeded advertising intensity in the relatively stable Baltimore, Maryland area.

We investigate the impact of increasing bank concentration on bank loan contracts in a lightly regulated environment that allows us to abstract from possible confounding effects of regulation and focus on the “pure” effects of competition on bank lending. We study over 30,000 British bank loans over the period 1885 to 1925. Borrowers in counties with high bank concentration received smaller loans and posted more collateral than borrowers in other counties. In high concentration counties, the quality of loan applicants improved, suggesting that banks restricted credit, not that the quality of loan applicants had worsened.

Japan has been in a slump for the past decade. After GDP had been growing by on average 4 percent during the 1980’s, the growth rate dropped to 1 percent in the 1990’s. Asset prices also fluctuated significantly: capital gains on stocks and real estate in the 1980’s, followed by capital losses in the 1990’s, were both on the order of a few years’ worth of GDP, even after taking inflation into account. Together with production and asset prices, the fraction of nonperforming loans fluctuated substantially. These are by no means all bank loans. For the nonfinancial corporate sector in Japan, the ratio of financial assets to total assets is about 40 percent, much higher than in the United States. Such financial assets include loans to and securities of other private agents. That is, nonfinancial institutions simultaneously borrow from and lend to each other on a significant scale. Many nonperforming loans are interlocked, paralyzing the financial system. It is important to recognize that these swings have been experienced by almost all sectors of the Japanese economy. Yet in other countries, comparable movements in asset prices have had less widespread consequences. For example, the recent fluctuations in the NASDAQ index in the United States have been no smaller than those of asset prices in Japan, but the damage appears to be contained to closely related sectors. Although U.S. equity-holders, particularly pension funds, have lost value, the level of nonperforming loans is relatively limited up to now. The question is: Why does there appear to be more contagion in some countries than in others? Has contagion anything to do with the nature of financing or the extent to which there are inter-locking loans? In this theoretical paper, we examine two different mechanisms by which contagion may occur. In both cases, propagation is through balancesheet effects. First, through the indirect effects that fluctuations in asset prices have on collateral values. Second, through the direct effects that default on or postponement of debt repayments have when there are chains of credit.

Plenary talk delivered at the annual meeting of the Society for Economic Dynamics.(This abstract was borrowed from another version of this item.)

We argue that long-term debt has a role in controlling management's ability to finance future investments. Companies with high (widely held) debt will find it hard to raise capital, since new security-holders will have low priority relative to existing creditors; conversely for companies with low debt. We show that there is an optimal debt--equity ratio and mix of senior and junior debt if management undertakes unprofitable as well as profitable investments. We derive conditions under which equity and a single class of senior long-term debt work as well as more complex contracts for controlling investment behavior.

This study examines a disequilibrium model of a small, open economy with explicit links between periods due to inventory accumulation, as well as the more conventional channels through current account imbalances and the government budget constraint. The key features of the model are that agents have perfect foresight with neutral public debt and that inventories adjust to smooth production intertemporarily. The paper explores the extent to which fiscal policy can be used selectively for coping with an export slump without running into a balance of payments constraint. Copyright 1989 by The Review of Economic Studies Limited.

Journal Article Moore's Laws of Wages Get access F. W. Taussig F. W. Taussig Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 26, Issue 3, May 1912, Pages 511–518, https://doi.org/10.2307/1883534 Published: 01 May 1912

The paper presents a model of a monetary economy where there are differences in liquidity across assets. Money circulates because it is more liquid than other assets, not because it has any special function.

The authors construct a model of a dynamic economy in which lenders cannot force borrowers to repay their debts unless the debts are secured. In such an economy, durable assets play a dual role: not only are they factors of production but they also serve as collateral for loans. The dynamic interaction between credit limits and asset prices turns out to be a powerful transmission mechanism by which the effects of shocks persist, amplify, and spill over to other sectors. The authors show that small, temporary shocks to technology or income distribution can generate large, persistent fluctuations in output and asset prices. Copyright 1997 by the University of Chicago.