Recent Journal Publications

Tracking the New Economy: Using Growth Theory to Detect Changes in Trend Productivity  
With Robert Rich
Journal of Monetary Economics, 54 (2007), pp. 1670-1701
49 pages / 261 kb

On the Causes of the Increased Stability of the U.S. Economy 
With Margaret M. McConnell, and Gabriel Perez-Quiros
Federal Reserve Bank of New York Economic Policy Review, v.8, May 2002, 183-202
20 pages / 228 kb

Finite Horizons, Political Economy, and Growth
With Jong-Soo Lim
Review of Economic Dynamics, v.4, January 2001

What Inventory Behavior Tells Us about Business Cycles
With Mark Bils
American Economic Review, v.90, June 2000, 458-481

The Design of Bank Loan Contracts
With Gary Gorton
Review of Financial Studies, v.13 Summer 2000, 331-364

Skilled Labor-Augmenting Technical Progress in U.S. Manufacturing
With Jong-Soo Lim
Quarterly Journal of Economics, v.113, November 1998, 1281-1308

Tariffs and Economic Activity: Lessons from the Great Depression
With M. Crucini
Journal of Monetary Economics, v.38, December 1996, 427-467

Other Recent Publications

Tracking Productivity in Real Time  
With Robert Rich
Federal Reserve Bank of New York Current Issues in Economics and Finance, Forthcoming
17 pages / 80 kb

Has Inventory Volatility Returned? A Look at the Current Cycle
With Margaret M. McConnell
Federal Reserve Bank of New York Current Issues in Economics and Finance, v.8, no.5 May 2002

An Empirical Model of Inventory Investment by Durable Commodity Intermediaries: A Comment 
Carnegie-Rochester Conference Series on Publlic Policy, v.50 forthcoming, 2000
7 pages / 26 kb

Explaining the Gap between New Home Sales and Inventories
Federal Reserve Bank of New York Current Issues in Economics and Finance, v.6, No.6 May 2000

Abstracts

Finite Horizons, Political Economy, and Growth 
With Jong-Soo Lim
Review of Economic Dynamics, v.4, January 2001.
This paper analyzes the political economy of growth when agents and the government have finite horizons and equilibrium growth is inefficient. A "representative" government (i.e. one whose preferences reflect those of its constituents) endowed merely with the ability to tax and transfer can improve somewhat on the market allocation, but cannot achieve first-best growth. Efficiency requires in addition the ability to bind future governments. We argue that this ability is related to political stability, and provide empirical evidence that stability and rowth-related policies (namely education) are meaningfully related.
Keywords: Growth, political economy, Markov equilibrium, education
JEL Classification: D9, H3, O5
37 pages / 253 kb

What Inventory Behavior Tells Us about Business Cycles 
With Bils, Mark
American Economic Review, v.90, June 2000, 458-481.
The countercyclical pattern of inventory-sales ratios is a striking feature of inventory behavior. In a model where inventories are productive for sales, both the markup of price over marginal cost and expected changes in marginal cost are key determinants of that ratio. This paper argues that costly variation in factor utilization gives rise to countercyclical markups in production-to-stock manufacturing industries. The markup turns out to be more important than intertemporal substitution in explaining the behavior of inventory-sales ratios.
Keywords: Inventories, Inventory-Sales Ratio, Business Cycles, Markups
JEL Classification: E22, E32
49 pages / 292 kb

The Design of Bank Loan Contracts  
With Gorton, Gary
Review of Financial Studies, v.13 Summer 2000, 331-364.
Bank loans and bonds are not the same and, consequently, are not priced the same way. We study the differences between bonds and loans in a model of renegotiation between a borrower and a lender in which there is the potential for moral hazard on each side of the relationship. The results show how the unique characteristics of bank loans emerge endogenously to enhance efficiency. The model also predicts that firm risk is endogenous and state-dependent, and that renegotiated interest rates on the debt need not be monotone in firm risk. Also, the initial terms of the debt are not set to price default risk. Rather, the debt face value is set to efficiently balance bargaining power in renegotiation. In a competitive banking system the debt face value consistent with efficient renegotiation outcomes may be inconsistent with zero profits. As a consequence, initial loan pricing may involve transfers-either from the borrower to the bank in the form of additional up-front fees, compensating balance requirements, or the purchase of other bank services; or from the bank to the borrower with the bank providing underpriced services to the borrower.
Keywords: Bank loans, moral hazard, renegotiation, default risk
JEL Classification: G21, G33, D82
34 pages / 288 kb

Skilled Labor-Augmenting Technical Progress in U.S. Manufacturing
With Jong-Soo Lim
Quarterly Journal of Economics, v.113, November 1998, 1281-1308.
This paper examines the role of skilled labor in the growth of total factor productivity. We use panel data from manufacturing industries to assess the extent to which productivity growth in yearly cross--sections is tied to industry shares of skilled labor inputs. We find robust evidence that productivity growth was increasingly concentrated in high-skill industries during a unique 10-year period beginning in the early 1970s. We do not find any positive association of productivity growth with new capital investment.
Keywords: Technical progress, skilled labor, productivity, manufacturing
JEL Classification: D24, J31, O30

Tariffs and Economic Activity: Lessons from the Great Depression
With Crucini, Mario J.
Journal of Monetary Economics, v.38 December 1996, 427-467.
We argue against the prevailing view that the macroeconomic role of tariffs during the Great Depression was small. To understand the economic channels through which tariffs could have large effects we build a multi-sector dynamic equilibrium trade model that captures key features of trade in the 1930s: A substantial share of trade was in material inputs, and the persistence of the tariff increases had the potential for significant effects on capital accumulation. Both of these features are important in generating the conclusion that, even when trade only represents a small share of output, tariffs can have a significant impact on GDP. Simulation of the model suggests that the global escalation of the tariff war precipitated the collapse of world trade, along with declines of several percent in international output and investment.
Keywords: International trade; Tariffs; Great Depression; General equilibrium
JEL Classification: E3, F1, F4

James Kahn's CV

The views expressed in the papers listed on this page are those of the author(s) and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System.