Macroeconomics

This chapter attempts to describe changes in economic theory over the last 50 years - both in the kinds of models used and in the factors that are identified as playing the key roles.

This century has been marked by two great economic experiments. The outcome of the first set, the socialist experiment that began, in its more extreme form, in the Soviet Union in 1917, is now clear. The second experiment is the movement back from a socialist economy to a market economy. Ten years after the beginning of the transition in Eastern Europe and the Former Soviet Union: How do we assess what has happened? What are the lessons to be learned?

The author argues that the Russia's transitional failures stem from a misunderstanding of the very foundations of a market economy, as well as a failure to grasp the fundamentals of reform processes.

In this paper, we consider American option contracts when the underlying asset has stochastic dividends and stochastic volatility. We provide a full discussion of the theoretical foundations of American option valuation and exercise boundaries. We show how they depend on the various sources of uncertainty which drive dividend rates and volatility, and derive equilibrium asset prices, derivative prices and optimal exercise boundaries in a general equilibrium model.

"Money's Worth" plays a prominent role in the U.S. Social Security debate. We cover all that good stuff in this chapter.

The author argues that trade liberalization must be balanced in agenda, process and outcomes, including not only sectors in which developed countries have a comparative advantage, like financial services, but also those in which developing countries have a special interest, like agriculture and construction services. Account must be taken of the marked disadvantage that developing countries have in participating meaningfully in negotiations.

Examines the correlation between investments and proxies for changes in net worth or internal funds and the importance of this correlation for firms likely to face information related capital-market imperfections. Developments and challenges in empirical research; Analytical underpinnings of models of capital market imperfections; Model's application to investment activities.

Our goal in this paper is to challenge the following popular argument: projected returns to Social Security are low relative to expected returns on stocks and bonds, and therefore everyone would receive higher returns and be better off if the United States moved to a privatized system where individuals could directly invest their contributions in stocks and bonds. We argue that for household with access to diversified capital markets, privatization without prefunding would not increase Social Security returns, when properly measured.