95-01 Bhattacharya, J., Guzman, M.G., Huybens,
E. and Smith B.D., "Monetary,
Fiscal, and Bank Regulatory Policy in a Simple Monetary
Most monetary growth models have a relatively simple
structure. There are two assets, money and capital, and
money is held either because it earns the same real return
as capital, or because it is ascribed an advantage in
transacting that is not explicitly modelled. Financial
market institutions are not present, nor are the financial
market frictions that presumably motivate monetary exchange.
These are important omissions since, for example, they
preclude any discussion of how financial market regulations
impact on capital accumulation or the rate of inflation.
This is an issue of great importance in development economics.
95-02 Renero, J.M., "Welfare
of Alternative Equilibrium Paths in the Kiyotaki-Wright
I provide new existence and welfare results for the
Kiyotaki-Wright model (JPE, 1989). Previous work on
the model has focused almost exclusively on steady-states
and has established the existence of multiple steady-states.
Moreover, welfare comparisons among steady-states are
of dubious significance because transitions are ignored.
For mixed strategies that restrict agents to play a
unique strategy for each opportunity set (which as shown
in Kehoe-Kiyotaki-Wright (ET, 1993) implies that the
number of steady-state is generically finite). I prove
that there exists an equilibrium in which the most costly
to-store good has the highest acceptance rate. Furthermore,
this equilibrium Pareto dominates equilibria in which
less costly to- store goods are universally accepted.
I also display multiple equilibria in which only pure
strategies are played. Among these is one in which the
universally accepted good is the least costly to-store
and another in which the universally accepted good is
the second least costly to-store. For some initial conditions
both exist and the latter is better according to a representative-agent-type
Thus, my results show (1) that there often exist equilibria
in which objects with poor storage properties are widely
accepted and (2) that these equilibria have good welfare
properties in relation to those in which better objects
are widely accepted.
95-03 Ladrón de Guevara, A., Ortigueira, S.,
and Santos, M., "A Two-Sector
Model of Endogenous Growth with Leisure"
This paper analyzes the equilibrium dynamics of an endogenous
growth model with physical and human capital in which
leisure considerations have a direct effect on the utility
function. Even in the absence of technological externalities
our model may contain multiple balanced paths. These multiple
steady-state configurations are directly related to the
modelization of leisure, and may provide an explanation
on certain patterns of behavior found in economic growth
and labor markets concerning human capital accumulation
and worked hours.
95-04 Santos, M., and Vigo, J., "Error
Bounds for a Numerical Solution for Dynamic Economic Models"
In this paper we analyze a discretized version of the
dynamic programming algorithm for a parameterized family
of infinite-horizon economic models, and derive error
bounds for the approximate value and policy functions.
If h is the mesh size of the discretization, then
the approximation error for the value function is bounded
by Mh^2, and the approximation error for the policy
function is bounded by $Nh,$ where the constants
$M$ and $N$ can be estimated from primitive
data of the model.
95-05 Cragg, M.I., and Epelbaum, M., "The
Premium for Skills in LDCs: Evidence from Mexico"
During the 1987-1993 period, all education-experience
skill classes in Mexico have experienced significant employment
and real wage growth. This growth was accompanied by a
large increase in wage dispersion within and across skill
classes. While shifts in labor supply are unlikely to
explain the changing wage and employment patterns, in
this growing economy supply and demand elasticities appear
to be an important factor. Still we find that it is difficult
to rationalize the relative wage changes without considering
a disproportionate increase in the demand for skilled
labor. We develop a test of whether the observed data
by industry is consistent with a production function based
upon a labor aggregator. We reject this hypothesis and
thus argue that some labor is more complementary with
capital and that the wage changes may be a function of
cheaper or more productive capital (skill biased technological
change). The rising relative demand for skilled workers
in Mexico during a period of increased trade with the
U.S. is evidence of the weakness of the Heckscher-Olin-Samuelson
95-06 Cragg, M.I., and Epelbaum, M., "Why
is Wage Dispersion Growing in Mexico? Is it the Incidence
of Reforms or the Growing Demands for Skills"
In the mid 1980s, Mexico undertook major trade reform,
privatization and deregulation. This coincided with a
rapid expansion in wages and employment that led to a
rise in wage dispersion. This paper examines the role
of industry and occupation-specific effects in explaining
the growing dispersion. We find that despite the magnitude
and pace of the reforms, industry-specific effects explain
little of the rising wage dispersion. In contrast occupation-specific
effects can explain almost half of the growing wage dispersion.
Finally, we find that the economy became more skill-intensive
and that this effect was larger for the traded sector
because this sector experienced much smaller low-skilled
employment growth. We therefore suggest that competition
from imports had an important role in the fall of the
relative demand for less-skilled workers.
95-07 Guerrero, V.M. and Peña, D., "Linear
Combination of Information in Time Series Analysis"
An important tool in time series analysis is that of combining
information in an optimal manner. Here we establish a
basic combining rule of linear estimators and exemplify
its use with several different problems faced by a time
series analyst. A compatibility test statistic is also
provided as a companion of the combining rule. This statistic
plays a fundamental role for obtaining sensible results
from the combination and for pointing out some possibly
new directions of analysis.