Inventories, Liquidity, and the Macroeconomy

Inventories, Liquidity, and the Macroeconomy

It is widely believed in the literature that inventory ‡uctuations are destabilizing to the economy. This paper re-assesses this view by developing an analyticallytractable general-equilibrium model of inventory dynamics based on a precautionary stockout-avoidance motive. The model’s predictions are broadly consistent with the U.S. business cycle and key features of inventory behavior, includin...

Bubbles, Liquidity and the Macroeconomy

The recent financial crisis has shown that financial frictions such as asset bubbles and liquidity spirals have important consequences not only for the financial sector, but also more generally for the macro economy. It forces economists to reevaluate firmly held beliefs about market efficiency, as well as convictions about the appropriate regulation of financial markets and approaches to macro...

Globalisation and the macroeconomy

Although the topic of globalisation has received considerable attention in many circles, it remains a phenomenon that we are still striving to understand. Not only can globalisation not be captured in a single measure or index, but its economic impacts are also difficult to isolate given the complexities in disentangling globalisation from other important structural changes that have occurred i...

Oil and the Macroeconomy

Agriculture and the Macroeconomy

It is argued that from the viewpoint of efficiency, agriculture should not be taxed relative to other sectors, and neither should it be favored. Nevertheless, developing countries have traditionally taxed the agricultural sector while developed countries have protected it, and both have incurred efficiency losses. Based on Schiff and Valdes (1992), it was shown that the taxation of agriculture ...