A positive and normative evaluation of alternative monetary policy regimes is addressed in a two-country general equilibrium model. The behaviour of the exchange rate, as well as of the other macroeconomic variables, depends crucially on the monetary regime chosen, though not necessarily on...

This Paper presents a two-country dynamic general equilibrium model with imperfect competition and nominal price rigidities in which terms of trade shocks coexist with inefficient supply shocks. We analyse the features of the optimal cooperative solution. While terms of trade shocks should be...

A two-country dynamic general-equilibrium model with imperfect competition and price stickiness is considered. This work shows the conditions under which price stability can implement the flexible-price allocation as a Nash equilibrium. This is possible if and only if both countries maintain a...

This paper provides first and second-order approximation methods for the solution of non-linear dynamic stochastic models in which the exogenous state variables follow conditionally-linear stochastic processes displaying time-varying risk. The first-order approximation is consistent with a...

Both conventional wisdom and leading academic research view pork barrel spendingas antithetical to responsible policymaking in times of crisis. In this paper we presentan alternative view. When agents are heterogeneous in their ideology and in theirinformation about the economic situation,...

We contribute to the intense debate on the real effects of …fiscal stimuli by showingthat the impact of government expenditure shocks depends crucially on key countrycharacteristics, such as the level of development, exchange rate regime, openness totrade, and public indebtedness. Based on a...

A large empirical literature claims that …fiscal policy in developingcountries is procyclical, in contrast to high-income countries where it is countercyclical. Some authors, however, have questioned this …finding because theliterature has typically ignored endogeneity problems. To settle this...