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Since the beginning of the 1990s, foreign direct investment (FDI) in developing countries has increased dramatically. The distribution of FDI flows across these countries, however, is highly uneven; only a small number attract comparatively large amounts of foreign capital. This paper investigates whether the pattern of FDI flows can be explained by the standard neoclassical model or by modified versions of this model that allow for differences in production technologies across countries. The results suggest that the standard neoclassical approach is not particularly useful if we want to understand FDI flows to developing countries.

Exports and Imports --- Economic Theory --- Production and Operations Management --- International Investment --- Long-term Capital Movements --- Innovation --- Research and Development --- Technological Change --- Intellectual Property Rights: General --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian) --- Finance --- Technology --- general issues --- International economics --- Macroeconomics --- Economic theory & philosophy --- Foreign direct investment --- Capital flows --- Capital productivity --- Neoclassical theory --- Balance of payments --- Production --- Economic theory --- Investments, Foreign --- Capital movements --- Neoclassical school of economics --- Sierra Leone --- General issues

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This paper examines the ability of alternative classes of growth models to explain the historical experience of the U.S. economy. The potential returns to the U.S. from raising its investment rate in terms of both the level and growth rate of future output are then quantified. The long-run growth performance of the U.S. economy is found to be broadly consistent with the predictions of the neoclassical growth model. Endogenous growth models, which suggest a larger contribution of capital to growth and long-run effects of investment on the growth rate, do not seem to be supported by the data.

Aggregate Factor Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Capital income --- Capital productivity --- Economic theory & philosophy --- Economic Theory --- Economic theory --- Employment --- Income economics --- Intergenerational Income Distribution --- Intertemporal Choice and Growth: General --- Labor economics --- Labor Economics: General --- Labor --- Labour --- Macroeconomics --- Macroeconomics: Production --- National accounts --- Neoclassical school of economics --- Neoclassical theory --- Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian) --- Production and Operations Management --- Production growth --- Production --- Unemployment --- Wages --- Working capital --- United States

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This Selected Issues paper for France provides an analytical framework to explain the consequences of the downward shift in the unemployment/wages relationship. This framework is also used to analyze possible changes in the equilibrium unemployment rate resulting from cuts in employers’ social security contributions and movements in the user cost of capital. The contribution of wage moderation to the reduction in the equilibrium unemployment is quantified. The paper also addresses the question of fiscal benefits of job-rich growth in France during 1997–2000.

Inflation --- Labor --- Macroeconomics --- Economic Theory --- Production and Operations Management --- Price Level --- Deflation --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Wages, Compensation, and Labor Costs: General --- Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian) --- Unemployment: Models, Duration, Incidence, and Job Search --- Labour --- income economics --- Economic theory & philosophy --- Welfare & benefit systems --- Economic growth --- Public finance & taxation --- Neoclassical theory --- Output gap --- Prices --- Economic theory --- Production --- Neoclassical school of economics --- France --- Income economics

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The consensus among central bankers is that higher inflation expectations can drive up inflation today, requiring tighter policy. We assess this by devising a novel method for identifying shocks to inflation expectations, estimating a semi-structural VAR where an expectation shock is identified as that which causes measured expectations to diverge from rationality. Using data for the United States, we find that a positive inflation expectations shock is deflationary and contractionary: inflation, output, and interest rates all fall. These results are inconsistent with the standard New Keynesian model, which predicts inflation and interest rate hikes. We discuss possible resolutions to this new puzzle.

Macroeconomics --- Economics: General --- Inflation --- Economic Theory --- Econometrics --- Intelligence (AI) & Semantics --- Expectations --- Speculations --- Price Level --- Deflation --- Money Supply --- Credit --- Money Multipliers --- Monetary Policy --- Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian) --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Technological Change: Choices and Consequences --- Economic & financial crises & disasters --- Economics of specific sectors --- Economic theory & philosophy --- Econometrics & economic statistics --- Machine learning --- Prices --- Neoclassical theory --- Economic theory --- Rational expectations --- Vector autoregression --- Econometric analysis --- Technology --- Currency crises --- Informal sector --- Economics --- Neoclassical school of economics

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The form of bounded rationality characterizing the representative agent is key in the choice of the optimal monetary policy regime. While inflation targeting prevails for myopia that distorts agents' inflation expectations, price level targeting emerges as the optimal policy under myopia regarding the output gap, revenue, or interest rate. To the extent that bygones are not bygones under price level targeting, rational inflation expectations is a minimal condition for optimality in a behavioral world. Instrument rules implementation of this optimal policy is shown to be infeasible, questioning the ability of simple rules à la Taylor (1993) to assist the conduct of monetary policy. Bounded rationality is not necessarily associated with welfare losses.

Monetary policy. --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Banks and Banking --- Inflation --- Economic Theory --- Production and Operations Management --- Forecasting and Other Model Applications --- Prices, Business Fluctuations, and Cycles: Forecasting and Simulation --- Monetary Policy --- Microeconomic Behavior: Underlying Principles --- Consumer Economics: Theory --- Macroeconomics: Production --- Price Level --- Deflation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian) --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics --- Banking --- Economic theory & philosophy --- Finance --- Output gap --- Neoclassical theory --- Real interest rates --- Production --- Economic theory --- Prices --- Banks and banking --- Neoclassical school of economics --- Interest rates