In less than three decades, China has grown from playing a negligible role in world trade to being one of the world's largest exporters, a substantial importer of raw materials, intermediate outputs, and other goods, and both a recipient and source of foreign investment. Not surprisingly, China's economic dynamism has generated considerable attention and concern in the United States and beyond.
Infinitely repeated games is the pre-dominant paradigm within which economists study long-term strategic interaction. The standard framework allows players to condition their strategies on all past actions; that is, assumes that they have unbounded memory. That is clearly a convenient simplification that is at odds with reality. In this paper we restrict attention to one-period memory and characterize all totally mixed equilibria. In particular, we focus on strongly mixed equilibria. We provide conditions that are necessary and sufficient for a game to have such an equilibrium.
This paper explores the link between financial conditions and economic activity. We first review existing measures, including both single indicators and composite financial conditions indexes (FCIs). We then build a new FCI that features three key innovations. First, besides interest rates and asset prices, it includes a broad range of quantitative and survey-based indicators. Second, our use of unbalanced panel estimation techniques results in a longer time series (back to 1970) than available for other indexes.
Frederic Mishkin responds to the Brookings Institution paper "Understanding Inflation-Indexed Bond Markets" by John Campbell, Robert Shiller, and Luis Viceira. Drawing from his experience as a former governor of the Federal Reserve, Mishkin discusses why their analysis is so important for policymakers.
Prices are typically used as proxies for countries' export quality. I relax this strong assumption by exploiting both price and quantity information to estimate the quality of products exported to the U.S. Higher quality is assigned to products with higher market shares conditional on price. The estimated qualities reveal substantial heterogeneity in product markets' scope for quality differentiation, or their "quality ladders." I use this variation to explain the heterogeneous impact of low-wage competition on U.S. manufacturing employment and output.
In every period, an aggressive country seeks concessions from a non-aggressive country with private information about their cost. The aggressive country can force concessions via war, and both countries suffer from limited commitment.We characterize the efficient sequential equilibria. We show that war is necessary to sustain peace and that temporary wars can emerge because of the coarseness of public information. In the long run, temporary wars can be sustained only if countries are patient, if the cost of war is large, and if the cost of concessions is low.
The conventional wisdom is that politicians' rent-seeking motives increase public debt and deficits. This is because myopic politicians face political risk and prefer to extract political rents as early as possible. In this paper we study the determination of government debt and deficits in a dynamic political economy model. We show that this conventional wisdom relies on economic volatility being low relative to political uncertainty.
In November of 2007, the New York City Department of Education assigned each elementary and middle school a letter grade (A to F) as part of a new accountability system. Grades were based on continuous numeric scores derived from levels and changes in student achievement and other school environmental factors such as attendance, and were linked to a system of rewards and consequences for schools and principals. We use the discontinuities in the assignment of grades to estimate the impact of accountability in the short run.
New goods play a central role in many trade and growth models. We use detailed trade and firm-level data from India to investigate the relationship between declines in trade costs, imports of intermediate inputs and domestic firm product scope. We estimate substantial gains from trade through access to new imported inputs. Moreover, we find that lower input tariffs account on average for 31 percent of the new products introduced by domestic firms.