Student Emigration and the Willingness to Pay for Public Schools: A Test of the Publicness of Public High Schools in the U.S.
Lori L. Taylor
Published as: Taylor, Lori L. (1992), "Student Emigration and the Willingness to Pay for Public Schools: A Test of the Publicness of Public High Schools in the U.S.," Public Finance = Finances publiques 47 (1): 131-152.
Abstract: This paper presents a test of Weisbrod's hypothesis that a public-goods aspect to education, coupled with anticipated emigration by students, leads communities to underinvest in education. It analyzes, in a simultaneous equations framework, the effects of both immigration and emigration on high school finance decisions in the United States. The analysis does not support the hypothesis of a public investment motive in educational finance. However, the revealed negative correlation between immigration and educational expenditures suggests that communities may be free-riding on human capital produced elsewhere by substituting "imported" human capital for local production.


Allocative Inefficiency in Education
Shawna Grosskopf, Kathy Hayes, Lori Taylor and William Weber


The Algebra of Price Stability
Nathan S. Balke and Kenneth M. Emery
Published as: Balke, Nathan S. and Kenneth M. Emery (1994), "The Algebra of Price Stability," Journal of Macroeconomics 16 (1): 77-97.
Abstract: In this paper, we propose two definitions of price stability that encompass the interpretations of price stability found in the economic literature. To determine the conditions under which monetary policy can achieve price stability, we examine several well-known classes of monetary rules including the targeting of monetary aggregates, nominal GNP, prices, and interest rates. In addition, we use a linear rational expectations model to explore the degree to which price stability constrains short-term stabilization policy. We find that price stability does not necessarily prevent the monetary authority from pursuing short-term stabilization goals.


Public Deficits in Mexico: A Comment
John H. Welch
Published as: Welch, John (1992), "Public Deficits in Mexico: A Comment," Estudios Economicos 7 (1): 139-144.
Abstract: This comment shows that the Mexican intertemporal budget balance was maintained for the period 1981 to 1988. The result contrasts with the one obtained by Feliz and Torres (1991).


North American Free Trade and the Peso: The Case for a North American Currency Area
Darryl McLeod and John H. Welch
Abstract: This paper discusses the nature and policy implications of recent fluctuations in the peso-dollar rate. We conclude that this is a propitious time for a shift in exchange rate regime but that a target zone for the peso has important advantages over a fixed rate or crawling peg system. Implementing this new regime as part of a "North American Dollar Area" agreement would benefit Mexico in particular and generally complement the NAFTA’s goal of increasing regional trade and investment.


The Optimality of Nominal Contracts
Scott Freeman and Guido Tabellini
Published as: Freeman, Scott and Guido Tabellini (1998), "The Optimality of Nominal Contracts," Economic Theory 11 (3): 545-562.
Abstract: This paper presents a model in which agents choose to use money as a medium of exchange, a means of payment, and a unit of account. The paper defines conditions under which nominal contracts, promising future payment of a fixed number of units of fiat money, prove to be the optimal contract form in the presence of either relative or aggregate price risk. When relative prices are random, nominal contracts are optimal if individuals have ex ante similar preferences over future consumption. When the aggregate price level is random, whether from shocks to the money supply or aggregate output, nominal contracts (perhaps coupled with equity contracts) lead to optimal risk-sharing if individuals have the same degree of relative risk aversion. Finally, nominal contracts may be optimal if the repayment of contracts is subject to a binding cash-in-advance constraint. In this case, a contingent contract increases the risk of holding excessive cash balances.


Rational Inflation and Real Internal Debt Bubbles in Argentina and Brazil?
John H. Welch


Credit Cards and Money Demand: A Cross-Sectional Study
John V. Duca and William C. Whitesell
Published as: Duca, John V. and William C. Whitesell (1995), "Credit Cards and Money Demand: A Cross-Sectional Study," Journal of Money, Credit and Banking 27 (2): 604-623.
Abstract: This study investigates credit card holding and the household demands for several monetary assets in a simulataneous equations framework. It exploits the detailed data on household assets, as well as demographic and preference characteristics in the 1983 Survey of Consumer Finance. A key finding is that, consistent with theory, a higher probability of credit card ownership implies a lower demand for liquid money balances with no effect on small time deposit balances.


An Econometric Analysis of Borrowing Constraints and Household Debt
John V. Duca and Stuart S. Rosenthal


Underdevelopment and the Enforcement of Laws and Contracts
Scott Freeman
Abstract: This paper presents a model of endogenously determined contract enforcement with two equilibria. In one, contracts are enforced and market activity is unhampered. In the other, contracts are not enforced, discouraging market activity, which leaves the nation without the resources and incentives to enforce contlacts. Even identically endowed nations may therefore find thernselves in very different equilibria. The model is offered to explain the wide and persistent gap between developed and undeveloped economies.


Detecting Level Shifts in Time Series: Misspecification and a Proposed Solution
Nathan S. Balke
Published as: Balke, Nathan S. (1993), "Detecting Level Shifts in Time Series," Journal of Business and Economic Statistics 11 (1): 81-92.
Abstract: This article demonstrates the difficulty that traditional outlier detection methods, such as that of Tsay, have in identifying level shifts in time series. Initializing the outlier/level-shift search with an estimated autoregressive moving average model lowers the power of the level-shift detection statistics. Furthermore, the rule employed by these methods for distinguishing between level shifts and innovation outliers does not work well in the presence of level shifts. A simple modification to Tsay's procedure is proposed that improves the ability to correctly identify level shifts. This modification is relatively easy to implement and appears to be quite effective in practice.


Learning from One Another: The U.S. and European Banking Experience
Robert T. Clair and Gerald P. O'Driscoll, Jr.
Published as: Clair, Robert T. and Gerald P. O'Driscoll, Jr. (1993), "Learning from One Another: The U.S. and European Banking Experience," Journal of Multinational Finance Management 2 (3-4): 33-52.
Abstract: In this paper, the authors compare and contrast the banking structures in the United States and the countries of the European Comtnunity (EC). While the U.S. has a large number of small, undiversified banks. By contrast, Europe contains a smaller number of larger banksprovidinga widerarray of financial services than their American counterparts. The differences will only be heightened by the Single Market initiative in Europe. The paper identifies a crucial regulatory difference between the U.S. and the EC regulatory approaches. While the EC is moving to home country regulation of banks, the U.S. relies on host state regulation. While the former system facilitates competitive entry, the latter inhibits it. The paper concludes by warning European policy makers against adopting co~nprehensive safety nets for banks, in order to avoid US.-style banking problems.


Hyperinflation and Internal Debt Repudiation in Argentina and Brazil: From Expectations Management to the "Bonex" and "Collor" Plans
John H. Welch


What Motivates Oil Producers?: Testing Alternative Hypotheses
Carol Dahl and Mine Yücel
Abstract: Conventional wisdon holds that OPEC is a weakly funccioning cartel with non-OPEC producers forming a "competitive fringe". However, several studies have challenged the cartel hypochesis for OPEC, and a few have even challenged the competitiveness of the fringe. In this paper we test competing hypotheses using recently developed cost data that allows the most general model to date. Because economic theory suggests that natural resource producers should dynamically optimize, we explicitly incorpoarte and test whether various oil producing countries do. Under our specification there was no evidence for dynanic optinization. Although formal target-revenue models were rejected, there was some evidence that targeting may influence production for OPEC countries. There was no evidence that any of the oil-producing countrles in OPEC behaved in a competitive manner. On the other hand, we were unable to detect any formal evidence of coordination among countries. More surprisingly, we do not find evidence that the fringe is competitive either.


Variations in Texas School Quality
Lori L. Taylor and Beverly J. Fox
Abstract: The main contribution of the study is the list of the value-added rankings of more than 700 Texas school districts, one that more closely approximates true school quality than rankings using single test scores or expenditure measures. We show that the distribution of school quatity in Texas is essentially random. No systematic relationship exists between grade school and high school quality. We also demonstrate that quality is unaffected by school district size and that there are few systematic differences in quality between school districts in urban counties and school districts in nonurban counties.


Evaluating Monetary Base Targeting Rules
R.W. Hafer, Joseph H. Haslag, Scott E. Hein


Government Purchases and Real Wages<
Mark A. Wynne


Immigrant Links to the Home Country: Empirical Implications for U.S. and Canadian Bilateral Trade Flows
David M. Gould
Published as: Gould, David M. (1994), "Immigrant Links to the Home Country: Empirical Implications for U.S. Bilateral Trade Flows," The Review of Economics and Statistics 76 (2): 302-316.
Abstract: Immigrants' ties to their home countries can play a key role in fostering bilateral trade linkages. Immigrant ties include knowledge of home-country markets, language, preferences, and business contacts that have the potential to decrease trading transaction costs. Empirical results for the United States suggest that immigrant links have historically been important in increasing bilateral trade flows with immigrants' home countries.


Large Shocks, Small Shocks, and Economic Fluctuations: Outliers in Macroeconomic Times Series
Nathan S. Balke and Thomas B. Fomby
Published as: Balke, Nathan S. and Thomas B. Fomby (1994), "Large Shocks, Small Shocks, and Economic Fluctuations: Outliers in Macroeconomic Times Series," Journal of Applied Econometrics 9 (2): 181-200.
Abstract: We analyse fifteen post-World War II US macroeconomic time series using a modified outlier identification procedure based on Tsay (1988a). 'Large shocks' appear to be present in all the series we examined. Furthermore, there are three basic outlier patterns: (I) outliers seem to be associated with business cycles, (2) outliers are clustered together-both over time and across series, (3) there appears to be a dichotomy between outlier behaviour of real versus nominal series. Also, after controlling for outliers, much of the evidence of non-linearity in many of the time series is eliminated.