Harold L. Cole

The Great Depression in the United States From A Neoclassical Perspective (2001)

The extent to which there are aggregate returns to scale at the level of aggregate production has important implications both for the types of shocks generating business cycles and for optimal...

Reputation with multiple relationships: reviving reputation models of debt

Can neoclassical theory account for the Great Depression in the United States--- both the downturn in output between 1929 and 1933 and the recovery between 1934 and 1939? Yes and no. Given the large...

Valuation equilibria with clubs

A traditional explanation for why sovereign governments repay debts is that they want to keep a good reputation so they can easily borrow more. Bulow and Rogoff have challenged this explanation. They...

Harold L. Cole, Edward C. Prescott

This paper considers model worlds in which there is a continuum of individuals who form finite-sized associations to undertake joint activities. We show how, through a suitable choice of commodity...

The role of institutions in reputation models of sovereign debt

Default, settlement, and signalling: lending resumption in a reputational model of sovereign debt

A standard explanation for why sovereign governments repay their debts is that they must maintain a good reputation to easily borrow more. We show that the ability of reputation to support debt...

Harold L. Cole, James Dow, William B. English

This paper develops a simple model of sovereign debt in which defaulting nations are excluded from capital markets and regain access by making partial repayments. This is consistent with the...

Reputation spillover across relationships: reviving reputation models of debt

A self-fulfilling model of Mexico's 1994-95 debt crisis

A traditional explanation for why sovereign governments repay debts is that they want to keep good reputations so they can easily borrow more. Bulow and Rogoff show that this argument is invalid...

Harold L. Cole, Timothy J. Kehoe

This paper explores the extent to which the Mexican government's inability to roll over its debt during December 1994 and January 1995 can be modeled as a self-fulfilling debt crisis. In the model...

Self-fulfilling debt crises

Harold L. Cole, Timothy J. Kehoe

We characterize the values of government debt and the debt's maturity structure under which financial crises brought on by a loss of confidence in the government can arise within a dynamic,...

Class systems and the enforcement of social norms

Harold L. Cole, George J. Mailath, Andrew Postlewaite

We analyze a model in which there is socially inefficient competition among people. In this model, self-enforcing social norms can potentially control the inefficient competition. However, the...

Finite memory and imperfect monitoring

Cole, Harold L., Kocherlakota, Narayana R.

Latin America in the Rearview Mirror

Harold L. Cole, Lee E. Ohanian, Alvaro Riascos

Latin American countries are the only Western countries that are poor and that aren't gaining ground on the United States. This paper evaluates why Latin America has not replicated Western economic...

Deflation and the International Great Depression: A Productivity Puzzle

Harold L. Cole, Lee E. Ohanian, Ron Leung

This paper develops the first dynamic, stochastic, general equilibrium analysis of the International Great Depression. We construct a new version of Lucas?s (1972) monetary misperceptions model, with...

Social Norms, Savings Behavior, and Growth.

Cole, Harold L, Mailath, George J, Postlewaite, Andrew

The authors argue that many goods and decisions are not allocated or made through markets. They interpret an agent's status as a ranking device that determines how well he or she fares in the...

Aristocratic Equilibria: Response.

Cole, Harold L, Mailath, George J, Postlewaite, Andrew

Can the Mortensen-Pissarides Matching Model Match the Business-Cycle Facts?

Cole, Harold L, Rogerson, Richard

We examine whether the Mortensen-Pissarides matching model can account for the business-cycle facts on employment, job creation, and job destruction. A novel feature of our analysis is its emphasis...

Latin America in the rearview mirror

Cole, Harold L., Ohanian, Lee E., Riascos, Alvaro, Schmitz, James Jr

The Great U.K. Depression: A Puzzle and Possible Resolution

Can the Mortonson-Pissarides matching model match the business cycle facts?

The UK was depressed for 20 years between the two World Wars. The decrease in output was entirely due to lower hours per worker and lower employment. Our main finding is that generous unemployment...

Harold L. Cole, Richard Rogerson

We examine whether the Mortensen-Pissarides matching model can account for the business cycle facts on employment, job creation, and job destruction. A novel feature of our analysis is its emphasis...

Direct investment: a doubtful alternative to international debt

Harold L. Cole, William B. English

The paper considers a model in which private foreign investors make direct long-lived capital investments in a small developing country that is subject to stochastic shocks to production. Depending...

The macroeconomic effects of world trade in financial assets

Harold L. Cole

This article analyzes some of the potential effects of increased international financial integration within a simple two-country model. In the model, the article considers a switch in the menu of...

Incorporating concern for relative wealth into economic models

Harold L. Cole, George J. Mailath, Andrew Postlewaite

This article develops a simple model that captures a concern for relative standing, or status. This concern is instrumental, in the sense that individuals do not get utility directly from their...

Reviving reputation models of international debt

Zero nominal interest rates: why they're good and how to get them

A traditional explanation for why sovereign countries repay debt is that they want to keep a good reputation so they can easily borrow more. This explanation does not hold if a country has access to...

Latin America in the rearview mirror

This study shows that in a standard one-sector neoclassical growth model, in which money is introduced with a cash-in-advance constraint, zero nominal interest rates are optimal. Milton Friedman...

Harold L. Cole, Lee E. Ohanian, Alvaro Riascos

Latin American countries are the only Western countries that are poor and that aren?t gaining ground on the United States. This article evaluates why Latin America has not replicated Western economic...

The Great Depression in the United States from a neoclassical perspective

Aggregate returns to scale: why measurement is imprecise

Can neoclassical theory account for the Great Depression in the United States—both the downturn in output between 1929 and 1933 and the recovery between 1934 and 1939? Yes and no. Given the large...

Models of Sovereign Debt: Partial versus General Reputations.

The extent to which there are aggregate returns to scale at the level of aggregate production has important implications both for the types of shocks generating business cycles and for optimal...

Cole, Harold L, Kehoe, Patrick J

Some economists argue that as long as governments can earn the market rate of return by saving abroad, standard reputation models cannot support debt. The authors argue that these standard reputation...

Specialization, Transactions Technologies, and Money Growth.

Cole, Harold L, Stockman, Alan C

This paper develops a differentiated product model with endogenous specialization in which either money or a costly alternative transactions technology can be used for market purchases. The authors...

Efficient Non-Contractible Investments in Large Economies

Cole, Harold L., Mailath, George J., Postlewaite, Andrew

Dynamic Games with Hidden Actions and Hidden States

Cole, Harold L., Kocherlakota, Narayana

Valuation Equilibrium with Clubs,

Cole, Harold L., Prescott, Edward C.

Class systems and the enforcement of social norms

Cole, Harold L., Mailath, George J., Postlewaite, Andrew

Shrinking money: the demand for money and the nonneutrality of money

Cole, Harold L., Ohanian, Lee E.

The role of institutions in reputation models of sovereign debt

Cole, Harold L., Kehoe, Patrick J.

Commodity trade and international risk sharing : How much do financial markets matter?

Cole, Harold L., Obstfeld, Maurice

Internationalization of financial markets and balance of payments imbalances: A Japanese perspective : A comment

Cole, Harold L.

Data Appendix to The Great U.K. Depression: A Puzzle and Possible Resolution

Efficient Allocations with Hidden Income and Hidden Storage.

Detailed macroeconomic data to accompany the article in the Review of Economic Dynamics

Cole, Harold L, Kocherlakota, Narayana R

We consider an environment in which individuals receive income shocks that are unobservable to others and can privately store resources. We provide a simple characterization of the unique efficient...

Self-Fulfilling Debt Crises.

Cole, Harold L, Kehoe, Timothy J

We characterize the values of government debt and the debt's maturity structure under which financial crises brought on by a loss of confidence in the government can arise within a dynamic,...

Deflation, Real Wages, and the International Great Depression: A Productivity Puzzle

Ron Leung, Harold L. Cole, Lee E. Ohanian

The high real wage story is one of the leading hypotheses for how deflation caused the International Great Depression. The story is that world-wide deflation, combined with incomplete nominal wage...

The U.S. and U.K. Great Depressions Through the Lens of Neoclassical Growth Theory

A self-fulfilling model of Mexico's 1994-1995 debt crisis

Cole, Harold L., Kehoe, Timothy J.

Two-sided expropriation and international equity contracts

Cole, Harold L., English, William B.

Expropriation and direct investment

Cole, Harold L., English, William B.

Default, Settlement, and Signalling: Lending Resumption in a Reputational Model of Sovereign Debt.

Cole, Harold L, Dow, James, English, William B

This paper develops a simple model of sovereign debt in which defaulting nations are excluded from capital markets and regain access by making partial repayments. This implication of the model is...

Efficient non-contractible investments

Harold L. Cole, George J. Mailath, Andrew Postlewaite

This paper addresses the question of whether agents will invest efficiently in attributes that will increase their productivity in subsequent matches with other individuals. We present a two-sided...

Dynamic games with hidden actions and hidden states

Harold L. Cole, Narayana Kocherlakota

We consider a class of dynamic games in which each player’s actions are unobservable to the other players and each player’s actions can influence a state variable that is unobservable to the...

The demand for money and the nonneutrality of money

Efficient allocations with hidden income and hidden storage

Many economists have worried about changes in the demand for money, since money demand shocks can affect output variability and have implications for monetary policy. This paper studies the...

Re-examining the contributions of money and banking shocks to the U.S. Great Depression

We consider an environment in which individuals receive income shocks that are unobservable to others and can privately store resources. We provide a simple characterization of the efficient...

Finite memory and imperfect monitoring

This paper quantitatively evaluates the hypothesis that deflation can account for much of the Great Depression (1929–33). We examine two popular explanations of the Depression: (1) The “high...

The great U.K. depression: a puzzle and possible resolution

Equilibrium (Economics)

Latin America in the rearview mirror

Between 1913 and 1929, real GDP per person in the UK fell 1 percent, while this same measure of economic activity rose about 25 percent in the rest of the world. Why was Britain so depressed in a...

Harold L. Cole, Lee E. Ohanian, Alvaro Riascos

Latin American countries are the only Western countries that are poor and that aren?t gaining ground on the United States. This paper evaluates why Latin America has not replicated Western economic...

Deflation and the international Great Depression: a productivity puzzle

Harold L. Cole, Lee E. Ohanian, Ron Leung

This paper presents a dynamic, stochastic general equilibrium study of the causes of the international Great Depression. We use a fully articulated model to assess the relative contributions of...

Reassessing aggregate returns to scale with standard theory and measurement

A microfoundation for incomplete security markets

Constant returns to scale is a central construct of neoclassical theory. Previous studies argued that one must adopt a specification of the production function with substantial unobserved service...

Models of sovereign debt: partial vs. general reputations

We consider a simple environment in which individuals receive income shocks that are unobservable to others and can privately store resources. We show that this ability to privately store can...

Dynamic games with hidden actions and hidden states

Bulow and Rogoff (1989b) show that as long as governments can earn the market rate of return by saving abroad, standard reputation models cannot support debt. We argue that these standard reputation...

Shrinking money and monetary business cycles

We consider the large class of dynamic games in which each player’s actions are unobservable to the other players, and each player’s actions can influence a state variable that is unobservable to...

Finite memory and imperfect monitoring

In the postwar period velocity has risen so sharply in the U.S. that the ratio of money to nominal output has fallen by a factor of three. We analyze the implications of shrinking money for the real...

New Deal policies and the persistence of the Great Depression: a general equilibrium analysis

Game theory

A few speculations on the role of financial intermediaries in transitional economies : A comment

There are two striking aspects of the recovery from the Great Depression in the United States: the recovery was very weak and real wages in several sectors rose significantly above trend. These data...

Cole, Harold L.

original papers : Investment and concern for relative position

George J. Mailath, Harold L. Cole, Andrew Postlewaite

Economists typically analyze individuals' market behavior in isolation from their nonmarket decisions. While this research strategy has generally been successful, it can lead to systematic errors...

Self-Enforcing Stochastic Monitoring and the Separation of Debt and Equity Claims

Harold L. Cole

We study the incentive issues associated with self-enforcing stochastic monitoring in a model of investment and production. The efficient contract features a debt-like payment with a threshold in...

Efficient Non-Contractible Investments in a Finite Economy

Harold L. Cole, George J. Mailath, Andrew Postlewaite

Investment and Concern for Relative Position

Harold L. Cole, George J. Mailath, Andrew Postlewaite

Efficient Non-Contractible Investments in Large Economies

Harold L. Cole, George J. Mailath, Andrew Postlewaite

Efficient Non-Contractible Investments

Harold L. Cole, George J. Mailath, Andrew Postlewaite

Class Systems and the Enforcement of Social Norms

Harold L. Cole, George J. Mailath, Andrew Postlewaite

Specialization, Transactions Technologies, and Money Growth

Harold L. Cole, Alan C. Stockman

With some models of money and a representative-agent there is no reason for monetary trade because identical individuals can consume their own production. Lucas proposed a parable involving...

Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?

Harold L. Cole, Maurice Obstfeld

This paper evaluates the gains from international risk sharing in some simple general-equilibrium models with output uncertainty. Under empirically plausible calibration, the Incremental loss from a...

Reputation Spillover Across Relationships with Enduring and Transient Beliefs: Reviving reputation Models of Debt