This paper introduces heterogeneous microeconomic behavior into a demand-driven stock-flow consistent model with endogenous credit creation, so as to study the joint dynamics of both the personal and the functional distribution of income, household debt and aggregate demand. The distinctive...

This paper considers the implications of the conceptual difference between the rental price of capital, embedded in the neoclassical cost identity (output equals the cost of labour plus the cost of capital), and used in growth accounting studies; and the profit rate, which can be derived from...

This paper shows that unit labor costs (ulcs), the most widely used measure of competitiveness, can be interpreted as the labor share in output multiplied by a price-adjustment factor. This has three main implications. First, ulcs are not just a technical concept since they embody the social...

In theory, valuation effects (changes in net external assets of a country arising from movements in exchange rates or asset returns) are an important channel of international risk sharing as they facilitate external adjustment. However, the effects can also be economically destabilizing in the...

This paper studies the interaction between capital income taxation and a means tested age pension in the context of an overlapping generations model, calibrated to the UK economy. Recent literature has suggested a rehabilitation of capital income taxation (Conesa et al. (2009)), predicated on...

The asset pricing model with external habit formation predicts that the equity premium depends on consumption changes relative to the habit level, implying a response that varies over the business cycle. We test this implication using a VAR model of the U.S. postwar economy whose time-varying...

This paper provides new evidence on the effects of fiscal policy by studying, using household-level data, how households respond to shifts in government spending. Our identification strategy allows us to control for time-specific aggregate effects, such as the stance of monetary policy or the...

This paper investigates welfare gains and channels of risk sharing among 14 Middle Eastern and North African (MENA) countries, including the oil-rich Gulf region and the resource scarce economies such as Egypt, Morocco and Tunisia. The results show that, for the 1992-2009 period, the overall...

The study examines the role of foreign capital and remittance inflows in the domestic savings of 63 developing countries for 1971-2010, paying attention to likely differential effects of FDI, portfolio investment, foreign aid and remittance. The conventional homogeneous panel estimates suggest...

This paper presents the novel implications of introducing price rigidities into a model of good-specific habit formation, for the response of private consumption following a positive government spending shock. With ’deep’ habits in demand, the price elasticity of demand rises after the...