NBER WORKING PAPER SERIES THE ECONOMICS OF ADJUSTMENT Andrew Caplin John Leahy Working Paper No. 4687 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 March 1994 We thank the National Science Foundation for fmancial support. This paper is part of NBER's research program in Economic Fluctuations. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research.