The asymmetric response of domestic prices to changes in import prices: a cointegration test of the rachet effect
The multivariate cointegration method is used to analyze the possibility that the aggregate domestic price level responds asymmetrically to import price changes in the short run. Using a more general model of price behavior and a more robust econometric technique, the method employs aggregate data and distinguishes short-run from long-run effects in a appropriately specified model. The findings show that it is possible to explain long-run price behavior across industrial countries by employing a single model as long as it is adequately inclusive, combining demand-pull and cost-push elements.
Publication Name: Journal of Macroeconomics
Macroeconomic aspects of social security reform
Suggestions are made on how to best initiate reforms in the US social security system in order to address long-run financial problems. It is noted that a plan to achieve actuarial balance in the system through legislative reform, which covers near-term tax increase and the preservation of a larger, long-lasting trust fund, would improve national saving. The trust fund should then be invested in private securities and be guarded against political constraints.
Publication Name: Brookings Papers on Economic Activity
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