r 9HE purpose of this paper is to explore a hypothesis, based on acIcumulating evidence, regarding the character of inventions likely to issue from the research laboratories of the large industrial corporations. Simply put, this hypothesis may be stated as follows: with few exceptions, the large industrial laboratories are likely to be minor sources of major (radically new and commercially or militarily important) inventions; rather they are likely to be major sources of essentially "improvement" inventions. Put more precisely, the hypothesis states that the proportion of all minor inventions originating in the large industrial laboratories is likely to exceed the proportion of all major inventions originating in these laboratories. Note that the stress on the relative importance of these laboratories as sources of improvement inventions is not necessarily a denigration of the economic importance of this contribution. The cumulative effect of these improvement inventions may be, and often has been, of substantial importance over long periods of time for advancing technology, investment opportunities, and economic growth. The stress on improvement inventions as the principal product of the research laboratories of the large industrial corporations is meant simply to emphasize that, whatever the importance of their contributions, most of the latter is not likely to involve radically new inventive activity. I cannot claim originality for this hypothesis. After it suggested itself in the course of my investigations, I discovered that others, some of them in the most unlikely positions,2 had earlier said much the same thing. But, apart from occasional remarks, I can find no discussions attempting to explain or justify it. And because, if reasonably accurate, it has numerous ramifications, I have felt the need to set down an extended analysis of 1 I wish to thank members of the Seminar on Law and Technology, sponsored by the University of Wisconsin Law School under the auspices of the Ford Foundation, for their many helpful comments on this paper. Especially do I wish to thank Professors Jacob Schmookler, Robert Merrill, John Stedman, Harrison White, and John Heath. 2 See particularly the statement quoted below (p. 114) of D)r. Frank Jewett, former president of Bell Laboratories.

The journal of political economy

This paper reviews and reassesses the methodology and principal findings of the "Rose effect," i.e., the trade effects of currency union, looking at both EMU and non-EMU currency unions. The consensus estimate suggests that the euro has already boosted intra-euro area trade by five to ten percent. The paper discusses a gamut of models that might explain the Rose effect in Europe and suggests a series of empirical test that could help identify the economic mechanisms involved.

The euro's trade effects

In this paper, we study Ramsey-optimal fiscal and monetary policy in a medium-scale model of the U.S. business cycle. The model features a rich array of real and nominal rigidities that have been identified in the recent empirical literature as salient in explaining observed aggregate fluctuations. The main result of the paper is that price stability appears to be a central goal of optimal monetary policy. The optimal rate of inflation under an income tax regime is half a percent per year with a volatility of 1.1 percent. This result is surprising given that the model features a number of frictions that in isolation would call for a volatile rate of inflation-particularly non-state-contingent nominal public debt, no lump-sum taxes, and sticky wages. Under an income-tax regime, the optimal income tax rate is quite stable, with a mean of 30 percent and a standard deviation of 1.1 percent.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID891011_code485639.pdf?abstractid=891011

Optimal Fiscal and Monetary Policy in a Medium-Scale Macroeconomic Model

The paper analyses the transmission of US monetary policy shocks to global equity markets and the macroeconomic determinants of the underlying transmission process. We show that there is a substantial cross‐country heterogeneity in reactions across 50 equity markets worldwide, with returns falling on average around 2.7% in response to a 100 basis point tightening of US monetary policy, but ranging from a zero response in some to a reaction of 5% or more in other markets. As to the determinants of the strength of transmission to individual countries, we test the relevance of their macroeconomic policies and the role of real and financial integration. We find that in particular the degree of global integration of countries – and not a country's bilateral integration with the United States – is a key determinant for the transmission process.

/pdf/global-financial-transmission-of-monetary-policy-shocks-3a9bqt8wwt.pdf

Global Financial Transmission of Monetary Policy Shocks

The present paper investigates the pass-through between market interest rates and bank interest rates in the euro area. Compared to the large interest rate pass-through literature the paper mainly improves upon two points. First, a novel data set, partially based on new harmonised ECB bank interest rate statistics is used. Moreover, the market rates are selected in a way to match the maturities of bank and market rates using information provided by the new statistics. Secondly, new panel-econometric methods are applied to test for heterogeneity in the pass-through process. The paper shows a large heterogeneity in the pass-through of market rates to bank rates between euro area countries and finally possible explanations of the heterogeneity are discussed.

/pdf/bank-interest-rate-pass-through-in-the-euro-area-a-cross-3t7x3irbez.pdf

Bank interest rate pass-through in the euro area: a cross country comparison

In this paper, we present a disaggregated framework for the analysis of past and projected structural developments in the most relevant revenue and expenditure categories and the fiscal balance. The framework, in particular, distinguishes between the effects of discretionary fiscal policy and of macroeconomic and other developments and is sufficiently standardised to be used in multi-country studies. Here, it is applied to Belgium, Finland, Germany, Italy, the Netherlands and Portugal over the period 1998 to 2004. During this period the structural primary balance ratio clearly worsened in all countries except Finland. In Belgium, Italy and the Netherlands, both revenue and expenditure contributed to the deterioration of the structural primary balance. In Germany the large deterioration in revenue was partially offset by the decline in the structural primary expenditure ratio, while the opposite was true for Portugal. The analysis highlights the various factors that contributed to these developments.

/pdf/a-disaggregated-framework-for-the-analysis-of-structural-3xj9l9i1sn.pdf

A disaggregated framework for the analysis of structural developments in public finances

This study contributes to the measurement of exchange market pressure and central bank intervention policy in a system of floating currency and partly sterilized foreign exchange interventions. A model-consistent approach is used. The measures of exchange market pressure and degree of intervention in the foreign exchange market are derived in the context of an empirically oriented small open economy monetary model with rational expectations. Monetary and foreign exchange policies are explicitly defined and foreign exchange interventions are allowed to be partly sterilized. Finally, the model is applied to Finnish data in order to analyse the pressure on the markka, which was floating during the period 1992?1996, and the Bank of Finland's reaction to that pressure. In contrast to most other empirical studies using various proxy variables, actual intervention data is used. According to the estimation results, the inclusion of the monetary policy reaction function and especially the sterilization of foreign exchange intervention makes the values of the measures of exchange market pressure and intervention policy more realistic and hence easier to interpret. This means that the fact that foreign exchange interventions are at least partly sterilized in the main industrial countries should be taken into account when exchange market pressure and central bank intervention policy are measured. This has not been done in other studies using a model-consistent approach. When the Bank of Finland's reaction to exchange market pressure is analysed, the results seem to suggest that the Bank let the markka float quite freely, reduced its intervention activity gradually as exchange market pressure diminished, and considered markka appreciation more desirable than depreciation during the markka float.

Measuring Exchange Market Pressure and Central Bank Intervention

This study contributes to the measurement of exchange market pressure and central bank intervention policy in a system of floating currency and partly sterilized foreign exchange interventions.A model-consistent approach is used.The measures of exchange market pressure and degree of intervention in the foreign exchange market are derived in the context of an empirically oriented small open economy monetary model with rational expectations.Monetary and foreign exchange policies are explicitly defined and foreign exchange interventions are allowed to be partly sterilized.Finally, the model is applied to Finnish data in order to analyse the pressure on the markka, which was floating during the period 1992-1996, and the Bank of Finland's reaction to that pressure.In contrast to most other empirical studies using various proxy variables, actual intervention data is used. According to the estimation results, the inclusion of the monetary policy reaction function and especially the sterilization of foreign exchange intervention makes the values of the measures of exchange market pressure and intervention policy more realistic and hence easier to interpret.This means that the fact that foreign exchange interventions are at least partly sterilized in the main industrial countries should be taken into account when exchange market pressure and central bank intervention policy are measured. This has not been done in other studies using a model-consistent approach.When the Bank of Finland's reaction to exchange market pressure is analysed, the results seem to suggest that the Bank let the markka float quite freely, reduced its intervention activity gradually as exchange market pressure diminished, and considered markka appreciation more desirable than depreciation during the markka float. Key words: exchange market pressure, foreign exchange intervention, intervention policy, Finland

Measuring exchange market pressure and central bank intervention

In this paper, we use a fairly simple monetary macro model to calculate the quarterly measures of exchange market pressure and the degree of the Bank of Finland's intervention during the time the markka was floated.Exchange market pressure measures the size of the exchange rate change that would have occurred if the central bank had unexpectedly refrained from intervening in the foreign exchange market.Intervention activity of the central bank is measured as the proportion of exchange market pressure relieved by foreign exchange interventions. According to the measures, exchange market pressure decreased during the course of the markka float.Looking at the float as a whole, we cannot say whether depreciation or appreciation pressure was clearly dominant.However, the quarterly exchange market pressure was more often negative than positive. The intervention indices indicate that the Bank of Finland limited the quarterby-quarter changes in the external value of markka almost totally allowing markka to drift slowly towards its underlying free-float equilibrium value.The estimates of intervention activity during periods of appreciation and depreciation pressure diverged most in 1994 and 1996.In 1994, depreciation pressure was dampened more carefully than appreciation pressure.In 1996, on the other hand, the Bank of Finland reacted much more cautiously to appreciation pressure.Overall, the Bank of Finland's reactions to appreciation pressure seem to have varied markedly, while its reactions to depreciation pressure seem to have been more consistent. Keywords: exchange market pressure, exchange market intervention, floating exchange rate regime

Mikko Spolander

Papers

A disaggregated framework for the analysis of structural developments in public finances

A disaggregated framework for the analysis of structural developments in public finances

Measuring Exchange Market Pressure and Central Bank Intervention

Measuring exchange market pressure and central bank intervention

Estimating exchange market pressure and the degree of exchange market intervention for Finland during the floating exchange rate regime