We estimate a dynamic two-country model in which economic fluctuations are driven by a worldwide supply shock, country-specific supply shocks, and relative fiscal, money, and preference shocks. Identification is achieved using only long-run restrictions, based on a theoretical model. The main results, are: (i) supply shocks, particularly country-specific ones, are very important in generating international business cycles, (ii) although the post-1973 flexible-exchange-rate period has been inherently more volatile, there are no differences in transmission properties of economic disturbances across exchange-rate regimes for the endogenous variables we focus on.

We construct a search equilibrium model for a city with central and suburban labor markets that is consistent with the set of empirical regularities commonly associated with the spatial mismatch hypothesis: a higher rate of unemployment for central city residents than suburban residents, a higher job vacancy rate for suburban firms, and reverse commuting and higher suburban wages. The effectiveness and welfare implications of public policy programs that might be used to remedy the underlying mismatch are examined.

We examine an endogenous growth model in which market frictions are an integral part of the economic environment. Workers invest in education when young, which raises their productivity once employed. The level of schooling also acts as a key determinant of the rate of economic growth by influencing workers' ability to accumulate additional human capital on-the-job. Once schooling is completed, workers search for employment. The division of the surplus between vacancies and searching workers is characterized, as is the optimal level of education. The economy may display multiple steady-state growth paths.

Casual analysis of six high-inflation episodes indicates a strong positive relationship between movements in the relative price ratio, measured by (WPI/CPI), and the inflation rate. The authors estimate a vector autoregression model in which relative price movements are driven by several fundamental disturbances (fiscal, monetary, output, and exchange rate), identified using only long-run restrictions based on a general-equilibrium optimizing model. Analysis of the endogenous response of relative price changes to these disturbances suggests that output and monetary shocks are the most important driving forces, although fiscal and exchange rate shocks are also influential in explaining relative price movements in some countries. Copyright 1993 by MIT Press.

Just how important a determinant of economic growth is the efficacy with which markets are organized? It is clear that in order to answer this question it is necessary to have both a well-articulated theory of economic growth and a precise notion of what it means for one market to be better organized than another. The newly developed theory of endogenous growth (pioneered by, among others, Paul M. Romer [1986], Robert E. Lucas [1988], Nancy Stokey [1988], and Gene Grossman and Elhanan Helpman [1991]) has equipped economists with a rigorous microeconomic foundation of the growth process. Since its original inception, research in this area has bifurcated: one strand of work has continued to emphasize the importance of capital accumulation (both physical and human) in environments in which agents are competitive price-takers; the other strand has a distinctly neo-Schumpeterian flavor, in which firms are price-setters and purposive innovative activity leads to technological advancement. But what of the role played by market organization? The growth literature has remained relatively silent on this issue. The reason is that the canonical growth model is one in which trade-either competitive or monopolisticly competitive-is coordinated by the Walrasian auctioneer. Given that ex hypothesi trade is frictionless, it is meaningless to use this framework to discuss issues pertaining to improvements in market organization. However, beginning with the seminal contributions of Peter Diamond (1982), Dale T. Mortensen (1982), and Christopher Pissarides (1985), economists have begun to construct models that dispense with the auctioneer's coordinating function. In this setting it is possible to make precise the notion of an improvement in market efficacy, since search and bargaining frictions are explicitly incorporated as an integral part of the trading environment. Yet, it is only very recently that this literature has begun to explore the consequences for perpetual economic growth.

This proposed theoretical model is based on new models of Barro and Becker and Becker Murphy and Tamura and explains the interaction of family decisions about fertility and the macroeconomy in a growth situation. The proposed model captures a dynamic interaction between labor/leisure and fertility choice and a structural fertility preference shock. Endogenous factor are consumption labor/leisure and fertility while exogenous factors are production and utility parameters. The aim was to develop a general equilibrium model which expresses short- and long-term dynamics to test the impact of economic disturbances on fertility and to explain the US baby boom and subsequent fertility patterns. Savings in capital accumulation and in labor supply were expected to have ambiguous effects while improved productivity was expected to increase steady state consumption. The methodology a structural Vector Auto Regression (VAR) model was developed by Blanchard and Quah and Ihmed Ickes Wang and Yoo. Structural impacts include disturbances in employment fertility (theoretical preference shift) and output. Long-term restrictions are based on theory rather than on ad hoc causal orderings (Sims method) or current responses (Bernanke method). The structural VAR model is estimated using the logged differences of labor fertility rate and output. The empirical results are based on analysis of US data (1949-88) on fertility weekly hours worked and real gross national product. The model revealed that fertility choice should not be considered exogenous to the labor market or to economic growth. Variance of the forecast error for the fertility rate was significantly explained by employment shocks; the effect was reduced fertility and increased labor force effort. Output responses to fertility and technology shocks were similar to those reported by Shapiro and Watson. In the variance decomposition analysis output shocks explained about 33% of output variance. Fertility shocks explained about 33% of labor growth and 25% of output growth after the first year. With a lag of one year about 37% of fertility variance was explained by employment shocks. Concluding remarks underscore the importance of knowing which shock initiated the motion and causal ordering.