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Labor supply --- Unemployment --- Econometric models --- Econometric models

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Money supply --- Econometric models

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There has been a significant interest on a theoretical level in the application of supergames to oligopoly behavior. Implications for pricing behavior in trigger-strategy models in response to aggregate demand are of particular importance for public policy considerations. We contrast the predictions for the movements of industry prices over the business cycle of two such models -- put forth by Edward Green and Robert Porter and by Julio Rotemberg and Garth Saloner -- and test the predictions using a panel data set of U.S. manufacturing industries. Our principal findings are four. First, the levels of price-cost margins of concentrated, homogeneous-goods industries, while higher than those of unconcentrated counterparts, appear to be closer to those predicted by a single-period Cournot-Nash equilibrium than monopoly. Second, there is little evidence to support the idea that price-cost margins of these industries have different cyclical patterns from other industries apart from effects by level of industry concentration. Maximum price declines for concentrated industries give little support for the occurrence of price wars during either recessions or booms. Finally, consistent with the predictions of the Rotemberg-Saloner model, the industries with high price-cost margins have more countercyclical price movements than those exhibited by other industries. That gradual price adjustment is quantitatively important for those industries, suggests, however, that other factors may lie behind the apparent rigidity of prices.

Business cycles --- Econometric models.

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The paper considers avariety of evidence that casts light on the validity of the life-cycle model of consumer behavior. In the first part of the paper, simple non-parametric tests are used to examine representative agent models of consumption and labor supply. It seems extremely unlikely that post-war United States evidence can usefully be explained by such a model, at least if the assumption of intertemporal separability is maintained. Changes in aggregate consumption bear little relationship to after tax real interest rates, and consumption has tended to grow even during periods of negative real interest rates. Joint consideration of consumption and labor supply does nothing to resolve the problems that arise when consumption is taken by itself. It is argued that these results cast doubt, not onlife-cycle theory itself, but on the representative agent assumption; there is little reason to suppose that changes inaggregate consumption should be related to the real interestrate.The second part of the paper is concerned with the time-series representation of disposable income and with it simplications for the behavior of consumption under the assumptions of the life-cycle model. If real disposable income is truly a first-order autoregressive process in first differences,a process that fits the data well and is becoming increasing popular in the macro time-series literature,then the life-cycle model implies that changes in consumption should be more variable than innovations in income, a prediction that is manifestly false. Various possible resolutions of this problem are reviewed, including habit formation and alternative representations of disposable income. The paper concludes with some evidence on the excess sensitivity question, why it is that consumption responds to anticipated changes in income. Monte Carlo evidence supports the suggestion made by Mankiw and Shapiro that the presence of time trends can cause severe problems of inference in models containing variables with unit roots, but the results makeit seem unlikely that this is the cause of the widespread excess sensitivity findings.

Consumption (Economics) --- Econometric models.

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International economic relations --- International trade --- Econometric models --- Econometric models. --- International trade - Econometric models