Editorial data

A number of recent studies have attempted to test propositions concerning ‘long-run’ economic relationships by means of frequency-domain time-series techniques that concentrate attention on low-frequency comovements of variables. The present paper emphasizes that many of these propositions involve expectational relationships that are not inherently related to specific frequencies or periodicities. Thus the association of low-frequency time-series test statistics with long-run economic propositions is not generally warranted. That such an association can be misleading is demonstrated by analysis of examples taken from notable papers by Geweke, Lucas, and Summers.     

Money and economic activity,inventories and business cycles

Incomplete information is a necessary condition for any real effects produced by monetary impulses. An alternative to the local-global inference problem is explored in this paper. Agents are confronted with permanent and transitory shocks. Even with full knowledge about the stochastic structure their best perception at any particular time will usually be erroneous. Prices for each period are set at the beginning of the period on the basis of market conditions. The realization of the shock process thus creates a short-run ‘disequilibrium’ absorbed by inventory adjustments. This adjustment translates perceived transitory monetary shocks into serially correlated output movements. The analysis proceeds within the context of rational expectations It offers a generalization of equilibrium analysis in two respects. Prices are always in equilibrium relative to perceived conditions, but they do not reflect all ongoing shocks. Quantity adjustments reflect the perceived transitory shocks. The framework used involves moreover a stock-flow interaction operated by inventory adjustments. The stock-flow interaction imposes at any time a future expected adjustment path (for price-level and quantities) to the system's unique stock equilibrium. A major implication of the analysis resolves a puzzle experienced in a recent paper by Robert Hall. It reconciles intertemporal substitution with lagged effects of monetary impulses. It also reconciles small and inconclusive cyclic movements in real wages with the occurrence of production function and large variations in unemployment. Lastly, the nature of the inference problem determined by the pattern of incomplete information produces serially correlated movements conditioned on large permanent shocks.     

New Ventures and Small Business Innovation for Economic Growth

Over the last twenty years evidence has been accumulating in favour of targeting innovative early-stage entrepreneurs for new forms of assistance. Experimental programming has been underway to find new ways to effectively support technologically innovative entrepreneurs. Further experimentation is needed to overcome remaining uncertainties and continuing objections.     

Book Reviews

Book Reviewed in This Article: THE ORIGINS OF TRADE UNION POWER: Henry Phelps STEEL STRIKE: A CASE STUDY IN INDUSTRIAL RELATIONS : Jean Hartley, John Kelly and Nigel Nicholson BACK FROM THE BRINK : Michael Edwardes IN SEARCH OF EXCELLENCE: LESSONS FROM AMERICA'S BEST RUN COMPANIES : Thomas J. Peters and Robert H. Waterman Jr. CORPORATE CULTURES: THE RITES AND RITUALS OF CORPORATE LIFE : Terrence E. Deal and Allen A.