Two comments in this issue of the Journal address our recent article in Volume 2, Issue 2. The fundamental issue with both comments is that they confuse the financial rate of return with the opportunity cost rate of return and therefore advocate for an inappropriate basis on which to calculate...

The intergenerational welfare effects of government deficits are examined in a simple life-cycle economy which can borrow at given interest rates and import at given prices but has unexploited market power in exports. Despite perfect capital market integration, a deficit-financed tax cut to the...

This paper examines the conditions under which the social opportunity cost of capital in a tax distorted economy is equal to the gross of tax return to capital plus the excess of the market over the shadow wage bill. Whenever public investment serves as an unpriced (or underpriced) input in the...

This paper shows that, in an economy with an exogenous rate of return and a given capital income tax distortion, and with lump sum taxes as the marginal tax instrument, the SOC and MCF criteria both correctly identify all worthwhile projects if the criteria are properly applied. The equivalence...

This paper highlights the role of export demand conditions in determining the real cost of external funding for a country that has unrestricted access to fu nding from the international capital market at a predetermined real i nterest rate. If such a country enters into a free trade arrangement...

A common theme of the rapidly developing literature on energyeconomy interaction is that higher energy prices-initiated by external events such as OPEC-will permanently reduce the growth potential of net energy-importing economies even if full-employment conditions are maintained. According to...