The objective of the paper is to develop a model of optimal endogenous technological progress that will exhibit two properties sought in growth models: (1) The bias will depend on the parameters of the model—particularly those affecting the cost of inputs—instead of being constrained to be Harrod neutral; (2) factor shares will be constant in steady state. Using previously derived sufficient conditions, we show the conditions under which such a model can be constructed.

The interest in business-cycle asymmetry has been steadily increasing over the past 15 years. Most research has focused on the different behavior of macroeconomic variables during expansions and contractions, which by now is well documented. Recent evidence suggests that such a two-phase characterization of the business cycle might be too restrictive. In particular, it might be worthwhile to decompose the recovery phase in a high-growth phase (immediately following the trough of a cycle) and a subsequent moderate-growth phase. The issue of multiple regimes in the business cycle is addressed using smooth-transition autoregressive (STAR) models. A possible limitation of STAR models as they currently are used is that essentially they deal with only two regimes. We propose a generalization of the STAR model such that more than two regimes can be accommodated. It is demonstrated that the class of multiple-regime STAR (MRSTAR) models can be obtained from the two-regime model in a simple way. The main properties of the MRSTAR model and several issues that are relevant for empirical specification are discussed in detail. In particular, a Lagrange multiplier-type test is derived that can be used to determine the appropriate number of regimes. A limited simulation study indicates its practical usefulness. Application of the new model class to U.S. real GNP provides evidence in favor of the existence of multiple business-cycle phases.

This paper investigates the effects of introducing imperfect competition in an international business-cycle model. We provide some international evidence on markups and analyze the implications of increasing returns to scale and monopolistic competition for the effects and the international transmission of technology and government spending shocks. We also consider exogenous markup fluctuations as a source of shocks and of transmission of business cycles. We show that imperfect competition improves the behavior of a standard model driven by technology shocks, although the behavior of foreign trade variables remains unexplained. We also show that an imperfectly competitive model driven by government shocks can explain the international business cycle at least as well as a model driven by technology shocks.

This paper studies the dynamic propagation of a liquidity shock through two real propagation channels: dynamic complementarities and time-varying capital utilization. The findings for an economy with intertemporal externalities are: (1) An otherwise transient liquidity shock will have real effects on output for several years; (2) time-varying capital utilization strongly augments this propagation; (3) the real effects of monetary shocks last longer when external productivity depreciates faster; and (4) nominal prices respond more sluggishly to a change in the money supply when there is a strong real propagation channel.

Foliations provide a general, convenient, geometric way to catalogue information from topics as varied as sufficient statistics, solutions of differential equations, indifference curves for utility functions, distributed computing, and so forth. An introduction to aspects of this area is provided.

Most of us are armchair economists. Whether our opinions are right or wrong, we can proffer them at little personal cost—the most we can lose is our reputation. Not so for János Kornai. For much of his life, speaking freely would have led him to land in jail, or worse. He faced a difficult choice. He could publish illegally, take the samizdat route, but reach a very small number of readers. He could instead respect a number of official taboos, publish legally, and reach a much wider readership. These difficulties have not prevented him from giving us the most informed and deepest critique of the socialist system to date. This interview is, I hope, successful in showing the degree to which Kornai's life and work have been intertwined, and how he came to believe what he believes today. Kornai is sharing his time between Harvard and Collegium Budapest. The interview took place in my office when I was visiting Harvard University in June 1998.

We analyze how uncertainty about when information about future returns to a project may be revealed affects investment. Whereas good news about future returns boosts investment, good news about news (that is, news that information may arrive sooner) is shown to depress investment. We show that early revelation increases the value of an irreversible investment project to a risk-neutral investor. Our framework allows us to study irreversible investment projects whose value has a time-variable volatility. We also consider how heterogeneity of revelation information across firms may induce a better-informed firm to share its information with competitors.