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James Holmes

Professor of Economics
431 Fronczak Hall
(716) 645-8680


  • Ph.D. University of Chicago
  • M.A. University of Chicago
  • B.A. Wabash College

Research Interests

Recent Papers and Downloadable Links:

Microfoundations of the Business Cycle and Monetary Shocks

Disequilibrium business cycles with cyclical involuntary unemployment are generated in a class of micro-founded macroeconomics models that produce endogenous nominal wage rigidity or stickiness from an optimal wage indexation choice by alternatively firms or workers, based upon the rationally or non-rationally expected distribution of only monetary shocks using general functional forms. With endogenous nominal rigidity the disequilibrium does not erode as time passes and inflationary monetary policy can mitigate disequilibrium only if non-rationally expected. If rationally expected, inflationary monetary policy has no real effects. Non-rational expectations can produce larger expected real income for some or all agents than rational expectations.

  • Reader’s Guide to Endogenous Nominal Wage, March 20, 2007 (.pdf)
  • Mathcad Reader’s Guide, March 20, 2007 (.pdf)
  • Mathcad Reader’s Guide, March 20, 2007 (mathcad)


In the paper, “Spurious Real Wage Cyclicality and Disequilibrium Theory” (.pdf), the evidence that the real wage/employment relationship is not countercyclical is re-examined and this conclusion is found to be specious, as it is based on inappropriately restricted parameter estimates. Disequilibrium theories that involve rigid wages and demand disturbances predict that the real wage/employment relationship should be labor demand/ supply constrained in contractions/expansions.  This implies that appropriate tests of the equilibrium versus disequilibrium hypothesis should involve parameter restrictions that test for (1) changing regimes between expansions and contractions, and 2) a negative relationship only in the latter. Recent disequilibrium theories, based upon rigorous micro-foundations, have strong implications for econometric tests including causality, choice of data, variable measurement, and dynamic structure.  Strong statistical support is found for the (new) disequilibrium hypothesis using new data.

In the paper, “The Minimum Wage, Teenage Employment and the Business Cycle” (.pdf), the effect of increases in the federal minimum wage on monthly black and white teenage employment is examined based upon our new disequilibrium theory at the level of the firm that predicts changing regimes between the demand and supply of labor associated with the business cycle phase.  Both simple, exploratory data analysis and more sophisticated econometrics are consistent with past findings when the data is pooled, but finds large, significant, negative employment effects in contractions and positive or zero, insignificant effects in expansions.  These effects apparently offset each other in the pooled data.  This is consistent with a disequilibrium theory and suggests that minimum wage policy should depend upon the phase of the business cycle.

Milton Frideman’s Minimum Wage Letter

Selected Publications

  • A Stochastic Monopsony Theory of the Business Cycle” (with P.A. Hutton), Economic Inquiry, (2005). [Reader’s Guide to Stochastic Monopsony, Mathcad files A, B, and C.]
  • “Savings Education: Learning the Value of Self-Control”(with P.A. Hutton), Education Policy Analysis Archives, (2005), lead article.
  • “Keynesian Involuntary Unemployment and Sticky Nominal Wages,” (with P.A. Hutton.) The Economic Journal (1996)
  • “A New Test of Money/Income Causality,” (with P.A. Hutton) Journal of Money, Credit and Banking (1992)
  • “The Specification of the Transaction Demand for Money and the Tax Multiplier,” (with D. J. Smyth) Journal of Political Economy (1972)
  • “A Functional-Form, Distribution-Free Alternative to Parametric Analysis of Granger Causal Models,” (with P.A. Hutton) Advances in Econometrics (1988)
  • “Memory and Market Stability: The Case of the Cobweb,” (with R. Manning) Economics Letters (1988)

Other Contributions and Distinctions

  • Board of Editors, Journal of Macroeconomics.
  • Recipient of Milton Pleasure Excellence in Teaching Award, 1996, 2003.
  • Who’s Who in America. (61th Edition, 2001, 60th Diamond Edition, 2005, and prior years). (They note that I discovered the “Holmes-Smyth Effect” and a new non-parametric test for causality in a non-experimental science.)
  • Who’s Who in American Education. (7th Edition, 2006,).
  • Who’s Who Among America’s (Best) Teachers (Who’s Who Among America‘s Teachers. (1998, 2000, 2001, 2003, 8th Edition, 2005, and 9th Edition, 2006).
  • Who’s Who in Social Sciences Higher Education. (2004-6).
  • 2000 Outstanding Intellectuals of the 21st Century – 1st Edition and 2nd Edition.
  • Leading Educators of the World. (2005).