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Financial Reform: What Shakes It? What Shapes It?

By Abdul Abiad and Ashoka Mody

American Economic Review, March 2005

What accounts for the worldwide advance of financial reforms in the last quarter century? Using a new index of financial liberalization, we find that influential events shook the policy status quo. Balance-of-payments crises spurred reforms, but banking c...

www.aeaweb.org/articles?id=10.1257/0002828053828699

Optimal Monetary Policy with Relative Price Distortions

By Tack Yun

American Economic Review, March 2005

This paper analyzes optimal monetary policy in a sticky price model with Calvo-type staggered price-setting. In the paper, the optimal monetary policy maximizes the expected utility of a representative household without having to rely on a set of linearly...

www.aeaweb.org/articles?id=10.1257/0002828053828653

The Case for Open-Market Purchases in a Liquidity Trap

By Alan J. Auerbach and Maurice Obstfeld

American Economic Review, March 2005

Prevalent thinking about liquidity traps suggests that the perfect substitutability of money and bonds at a zero short-term nominal interest rate renders open-market operations ineffective for achieving macroeconomic stabilization goals. We show that even...

www.aeaweb.org/articles?id=10.1257/0002828053828473

Wealth as a Determinant of Comparative Advantage

By José Wynne

American Economic Review, March 2005

This paper shows that a country's wealth can be an important determinant of comparative advantage when access to credit differs across sectors of the economy. Wealthier nations exhibit a comparative advantage toward goods produced in sectors facing more s...

www.aeaweb.org/articles?id=10.1257/0002828053828626

Extracting Inflation from Stock Returns to Test Purchasing Power Parity

By Bhagwan Chowdhry, Richard Roll, and Yihong Xia

American Economic Review, March 2005

Relative purchasing power parity (PPP) holds for pure price inflations, which affect prices of all goods and services by the same proportion, while leaving relative prices unchanged. Pure price inflations also affect nominal returns of all traded financia...

www.aeaweb.org/articles?id=10.1257/0002828053828554

The Quantity and Quality of Life and the Evolution of World Inequality

By Gary S. Becker, Tomas J. Philipson, and Rodrigo R. Soares

American Economic Review, March 2005

GDP per capita is usually used to proxy for the quality of life of individuals living in different countries. Welfare is also affected by quantity of life, however, as represented by longevity. This paper incorporates longevity into an overall assessment ...

www.aeaweb.org/articles?id=10.1257/0002828053828563

Distance, Time, and Specialization: Lean Retailing in General Equilibrium

By Carolyn L. Evans and James Harrigan

American Economic Review, March 2005

Transport time increases with distance traveled, and time is valuable. We show the implications of these facts for global specialization and trade: products where timely delivery is important will be produced near the source of final demand, where wages w...

www.aeaweb.org/articles?id=10.1257/0002828053828590

How to Protect Future Generations Using Tax-Base Restrictions

By Antonio Rangel

American Economic Review, March 2005

This paper studies how to protect future generations from expropriation and to induce optimal investment in intergenerational public goods (IPGs), by introducing constitutional restrictions on the tax base. The type of tax-base restrictions that we consid...

www.aeaweb.org/articles?id=10.1257/0002828053828527