In this paper we view the tax schedule applied to the profits of a Multinational Enterprise (MNE) as the outcome of a sequential bargaining process and show, using modern game theory developments (the "perfect equilibrium" solution concept) that tax holidays will emerge from such a process if a...

We present a pricing model for secondary market debt designed to assess the impact of debt reduction on valuation of remaining claims and to value guarantees in various forms. The technique used, option pricing, accounts explicitly for the sources and natures of risks on secondary market pricing...

This paper examines the effects of tax cuts in a multi-country world where both labour supply and capital formation are endogenous and taxes are distortionary. We highlight four channels through which tax cuts affect interest rates and the economy in general: (i) an increase in the supply of...

Blanchard (2005) suggested that active interest rate policy might induce unstable dynamics in highly-indebted economies. We examine this in a dynamic general equilibrium model where Calvo-type price rigidities provide a rationale for inflation stabilization. Unstable dynamics can occur when the...

How should countries like Poland or the USSR move towards price flexibility, gradually or in a `big bang'? Why is it that governments committed to eventual price flexibility so often seem to be unable to let go of `temporary' controls? How can one explain that after price increases early in a...

We use a model with full intertemporal optimization and short-run rigidities in the real wage of the Fischer-Gray type to demonstrate the effects of deficit spending in different employment regimes. We allow for prices to exhibit upward flexibility, although once set at the beginning of one...

Voucher privatization programmes have been criticized for leading to excessively dispersed ownership and hence failure of control and insufficient corporate governance. We analyse the results of the five auction rounds of the Czech privatization programme and subsequent stock market...

Eastern Europe is not well served with straightforward textbook advice. The common wisdom on privatization fails to address the problems created by diffuse ownership and control prior to privatization. Cash auctions may not efficiently match managers and capital stock because of wealth...

Rapid trade liberalization is often followed by a decline in private savings, although permanent changes in trade policy do not affect intertemporal prices and should thus leave private savings unaffected. But a positive probability of future policy reversal lowers the consumption rate of...

We present evidence of major adjustment efforts in the State sector in Poland well before privatization. Extensive survey evidence is used both to establish this point and to find an answer to the question why managers instigated such reforms in spite of the absence of an effective ownership...