A dynamic dependent-economy model is developed to investigate the role of the real exchange rate in determining the effects of foreign aid. If capital is perfectly mobile between sectors, untied aid has no longrun impact on the real exchange rate. A decline in the traded sector occurs because...

The interdependence between the optimal degree of wage indexation and optimal monetary policy is analyzed for a small open economy under a variety of assumptions regarding: (i) relative information available to private agents and the stabilization authority; (ii) the perceived nature of the...

This paper discusses some of the recent developments in growth theory, doing so from the perspective of a small open economy. After setting out a basic generic model, we show how it may yield two of the key models that have played a prominent role in the recent literature, the endogenous growth...

This paper analyzes the impact of differential tariffs on consumption and investment in a specific factors model of a small open economy in which capital is accumulated over time. Particular attention is devoted to the welfare aspects. highlighting the cost of the intertemporal distortions...

This paper constructs a stochastic general equilibrium model of a small open economy consisting of risk averse optimizing agents. The stochastic processes describing the rate of monetary growth, government expenditure, private production, and the foreign price level are taken to be exogenous,...

This paper analyzes the effects of both a permanent and a temporary deterioration In the terms of trade on a small open economy. The model, based on intertemporal optimization, emphasizes the labor-leisure choice and the role of capital accumulation There are two main conclusions to be drawn...

A dynamic dependent-economy model is developed to investigate the role of the real exchange rate in determining the effects of foreign aid. If capital is perfectly mobile between sectors, untied aid has no longrun impact on the real exchange rate. A decline in the traded sector occurs because...

How do capital income taxes affect household portfolio choice and growth? Wequot; approach this question within the context of a stochastic model of a small open economy inquot; which taxes on income from domestic capital (equity) and foreign bonds affect householdquot; portfolio choice, welfare...

This paper develops strategic monetary policies using a standard two-country macro model under flexible exchange rates. The equilibria considered include feedback Nash and feedback Stackelberg, both of which are compared to the Pareto optimal cooperative equilibrium. The optimal policies are...