Vol. 92, No. 3
Third Quarter 2007

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Financial Market Frictions
Ramon P. DeGennaro and Cesare Robotti
Market frictions, which exist even in efficient markets and change over time, impede trade but also offer profit opportunities. To provide a framework for understanding market frictions, the authors classify frictions into five categories.

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When More Is Better: Assessing the Southeastern Economy with Lots of Data
Pedro Silos and Diego Vilán
The authors estimate a model that provides a single indicator for the southeastern economy, making it easier for policymakers and analysts to assess regional economic conditions and compare them to the broader economy.

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Smoking: Taxing Health and Social Security
Brian S. Armour and M. Melinda Pitts
Because they have shorter life expectancies, smokers incur a higher net marginal Social Security tax rate than nonsmokers. This higher tax rate could affect both labor supply behavior and the Social Security System's funding.