Trade Policies and Industrialisation*

In this paper, the three-commodity model of Gruen and Corden is used to examine the effects of import restriction policies designed to promote industrial development. It is shown that under circumstances which might reasonably be expected to exist in developing economies such policies will likely appear successful in the short run, but may fail in the long run, if the import-competing sector's expansion is largely achieved by the diversion of resources from an infant manufacturing sector producing exportables. An export subsidy is the more appropriate policy under these circumstances.     

A CONSUMER PRICE INDEX FOR SWEDEN, 1290–2008

This paper presents a Consumer Price Index for Sweden 1290–2008. Constructing an index that covers more than seven centuries poses conceptual and empirical problems, and demands some methodological innovations. For example, during numerous occasions the currency unit was changed, and in some periods multiple currencies were used at floating exchange rates relative to each other. This paper also presents two different price indices, one that mainly serves the purposes of estimating real prices and real wages, and another that provides a measure of inflation. While the former follows the main currency unit, the latter also takes into account that debased coins were devalued during recoinage.     

A Proposed Framework for Monetary Policy

Leave the ERM, cut interest rates and let the pound find its own level⃛ it's the cut and run option. The credibility of our anti-inflationary strategy would be in tatters. And quite soon interest rates would have to go back up again - Norman Lamont, in a speech to the European Policy Forum, July 1992.     

TAX REVISIONS OF 2004 AND PRO SPORTS TEAM OWNERSHIP

Tax law revisions of 2004 altered the “roster depreciation allowance” enjoyed by pro sports team owners. Supporters claimed this would practically eliminate costly legal oversight by the IRS and, ultimately, increase owner tax bills. Government officials and leagues remained silent on team value impacts but outside analysts argued they would rise by 5%. We model this policy change and investigate it empirically. Supporters in Congress were absolutely correct that owner tax payments should increase but outside analysts underestimated team value increases by half. No wonder Major League Baseball and the National Football League favored the revision. (JEL D21, G38, H25, L83)     

Inflation: The Invisible Foot of Macroeconomics*

We take a simple, well-known macroeconomic model and treat it as a game between two players—the government and an all-embracing union. The payoffs have the form of a prisoner's dilemma. The equilibrium outcome produces unwanted inflation and is not Pareto optimal. This is despite the fact that all participants are assumed to have full information. This result is shown to be quite robust to the form of the model and is not affected if one of the players is forced to announce its strategy in advance. This we call the invisible foot of macroeconomics.