Stephen Turnovsky - Academia.edu (original) (raw)

Papers by Stephen Turnovsky

Journal of International Economics, Nov 1, 1986

The research reported here is part of the NBER's research program in International Studies. Any o... more The research reported here is part of the NBER's research program in International Studies. Any opinions expressed are those of the author and not those of the National Bureau of Economic Research.

International Review of Economics & Finance

Review of World Economics, 2021

This paper addresses the impact of productive government expenditure on income inequality using a... more This paper addresses the impact of productive government expenditure on income inequality using a dataset of 80 countries over the period of 1980–2015. It incorporates the conflicting predictions implied by alternative growth models on this issue. While the neoclassical model suggests that productive government expenditure will reduce long-run income inequality, the corresponding endogenous growth model suggests the opposite. We examine this proposition, by considering both the aggregate Gini coefficient, and the income shares of quintiles. The results obtained using the Gini coefficients provide compelling support for the contrasting impacts of government investment on income inequality, suggested by the underlying theoretical models. These findings are supported, albeit somewhat more weakly by the regressions employing the quintile data. Our general conclusion is that government investment has a mixed effect on income inequality, a conclusion consistent with previous studies.

SSRN Electronic Journal, 2021

This paper compares the impact of government investment and government consumption expenditures o... more This paper compares the impact of government investment and government consumption expenditures on macroeconomic aggregates and inequality in an economy in which the government deficit is money-financed, while maintaining a fixed ratio of debt-money. Most real aggregate quantities are independent of the debt-money ratio, which has only weak short-run impacts on wealth and income inequality. We also investigate numerically the impact of these two forms of government expenditure on the macroeconomic aggregates and distributions. Though they have sharp contrasting effects in terms of the tradeoffs they entail, their impact is moderate. Our simulations suggests that there is scope for substantially more intensive government intervention in the recovery of the post-pandemic economy, without serious adverse consequences or encountering issues of sustainability.

Journal of Macroeconomics, 2020

Indian Economic Review, 2019

Journal of International Economics, 2019

Open Economies Review, 2019

American Economic Journal: Macroeconomics, 2016

The English structural transformation from farming to manufacturing was accompanied by rapid tech... more The English structural transformation from farming to manufacturing was accompanied by rapid technological change, expansion of trade, and massive population growth. While the roles of technology and trade in this process have been investigated, the literature has largely ignored the role of population growth. We examine population size effects on various aspects of structural development, characterizing their explicit dependence on preference-side and production-side characteristics of the economy, and trade. Our quantitative analysis of the English transformation assigns a major role to population growth, with especially notable contributions to post-1750 rise in the manufacturing employment share and the relative price dynamics. (JEL J11, N13, N33, N53, N63, O33)

Open Economies Review, 2017

Macroeconomic Dynamics, 2010

This paper analyzes the aggregate growth and distributional effects of tax policy using an endoge... more This paper analyzes the aggregate growth and distributional effects of tax policy using an endogenous growth model with heterogeneous agents having “catching up with the Joneses” (CUJ) types of preferences. We characterize the aggregate equilibrium of this economy, as well as its distributional properties, and show that the consumption externality present with CUJ preferences produces greater income inequality than is obtained with conventional time-separable preferences. The consumption externality substantially alters the effects of tax policy, mostly quantitatively, but in some cases qualitatively as well. Extensive numerical simulations are conducted and used to compare the consequences of different modes of taxation, highlighting the tradeoffs involved.

Journal of Economic Dynamics and Control, 1991

... Access Statistics for this article. Journal of Economic Dynamics and Control is edited by J. ... more ... Access Statistics for this article. Journal of Economic Dynamics and Control is edited by J. Bullard, C. Chiarella, H. Dawid, CH Hommes, P. Klein and C. Otrok. More articles in Journal of Economic Dynamics and Control from Elsevier Series data maintained by Heidi Boesdal (). ...

Journal of Economic Dynamics and Control, 1979

This paper considers optimal monetary stabilization policy under flexible exchange rates in a mod... more This paper considers optimal monetary stabilization policy under flexible exchange rates in a model where exchange rate expectations are generated regressively. The analysis highlights the intimate relationship that exists between: (a) the direction of the optimal monetary feedback rule, (b) the amount of initial overshooting of the exchange rate following an exogenous monetary expansion, (c) the subsequent speed of adjustment to the new equilibrium. The optimal policy may either involve leaning against the wind, thereby reducing the size of the initial jump and the speed of the subsequent adjustment, relative to a passive policy. Alternatively it may involve leaning with the wind, in which case both the size of the initial jump and the speed of subsequent adjustment are increased.

International Economic Review, 1976

WITH THE UNCERTAINTIES due to the current inflationary conditions, the desirability of price stab... more WITH THE UNCERTAINTIES due to the current inflationary conditions, the desirability of price stabilization has once again become a topical issue in the area of public economic policy. It is a subject with a long history, much of the discussion originating with Waugh [17]. In that paper he established the proposition that consumers having a fixed downward sloping demand curve and facing random prices due to stochastic fluctuations in supply, are better off than if these prices are stabilized at their mean.2 Some years later, Oi [7] demonstrated a parallel result for firms. He showed that if they have an upward slopingsu pply curve and face random selling prices due to stochastic shifts in demand, then they too, will lose from having prices stabilized at their mean.3 These two analyses considered the welfare of one group only, ignoring the effects the price stabilization scheme may have on the other. The first author to recognize this was Massell [5] who integrated these two contributions into a single framework. Assuming linear demand and supply curves and additive stochastic disturbances he showed: ( i ) Producers lose (gain) from price stabilization if the source of price instability is random shifts in demand (supply); (ii) consumers lose (gain) from price stabilization if the source of price instability is random shifts in supply (demand); (iii) where both demand and supply are random, the gains to each group are indeterminate and depend upon the relative sizes of the variances and upon the slopes of the demand and supply curves; (iv) provided neither the demand curve nor the supply curve is perfectly elastic, the total gains from stabilization are always positive, with the gainers being able in principle, to compensate the losers. With infinitely elastic functions, all gains tend to zero. While Massell's analysis has the advantage that the expressions measuring the welfare gains from stabilization can be calculated explicitly, linearity is nevertheless, a restrictive assumption. Much relevant empirical work finds non-linear relationships, such as log-linear functions, to be superior, in which case the

Economica, 1981

A familiar proposition in the descriptive monetary growth literature is that perfect foresight in... more A familiar proposition in the descriptive monetary growth literature is that perfect foresight in predicting the rate of inflation will typically cause "saddlepoint-type" instability in the movement of prices.' In an important and influential paper, Sargent and Wallace (1973) have shown that in a simple one-dimensional model stability can be restored by dropping the conventional assumption of continuous prices and instead allowing discontinuous price jumps to equilibrate the money market. In this paper we examine a two-dimensional system that, unlike the simple Sargent-Wallace formulation, is capable of generating dynamic equilibria which are legitimate saddlepoints, and thus we are able to analyse the behaviour along stable paths.2 These stable paths are of particular economic interest because they are implied by the familiar hypothesis that economic agents form convergent rational expectations.3 Our interest in a two-dimensional macroeconomic model is more than a trivial mathematical generalization. For example, in the one-dimensional SargentWallace model, the assumption of convergent rational expectations necessitates that prices adjust instantaneously, so that the economy is always at the dynamic equilibrium point. If in actuality prices in an economy adjust only sluggishly, then this procedure is illegitimate. We introduce a labour market and we allow for the possibility that the money market and the labour market will adjust at finite rates rather than being in continuous equilibrium. As relative speeds of adjustment vary in the two markets, this extended model is capable of generating a variety of dynamic time paths, including the familiar saddlepoint behaviour, convergence to a stable node, or divergence from an unstable node. The type of dynamic equilibrium that will prevail depends upon the values of parameters and hence is an empirical issue. The methods for stabilizing the system in the various cases, determined by the pattern of adjustment speeds, are described in Section I, with the more technical details being relegated to the Appendix. In particular, if the price level is not free to adjust, we show that stability can be obtained through the labour market. And, conversely, if labour market adjustment is not possible at an instant of time, we show how stability can be obtained through the money market. In Section II we analyse the effects of expansionary monetary policy for the