We argue that the main barrier to an integrated international interbank market is the existence of asymmetric information between different countries, which may prevail in spite of monetary integration or successful currency pegging. In order to address this issue, we study the scope for...

We study the effect of regional expenditure and revenue shocks on price differentials for 47 US states and 9 EU countries. We identify shocks using sign restrictions on the dynamics of deficits and output and construct two estimates for structural price differentials dynamics which optimally...

Large law firms seem to prefer hourly fees over contingent fees. This paper provides a moral hazard explanation for this pattern of behavior. Contingent legal fees align the interests of the attorney with those of the client, but not necessarily with those of the partnership. We show that the...

This paper looks at the dynamic management of risk in an economy with discrete time consumption and endowments and continuous trading. I study how agents in such an economy deal with all the risk in the economy and attain their Pareto optimal allocations by trading in a few natural securities:...

We study the effects of nominal debt on the optimal sequential choice of monetary policy. When the stock of debt is nominal, the incentive to generate unanticipated inflation increases the cost of the outstanding debt even if no unanticipated inflation episodes occur in equilibrium. Without full...

In monetary unions, monetary policy is typically made by delegates of the member countries. This procedure raises the possibility of strategic delegation - that countries may choose the types of delegates to influence outcomes in their favor. We show that without commitment in monetary policy,...

In this paper we propose a simple and general model for computing the Ramsey optimal inflation tax, which includes several models from the previous literature as special cases. We show that it cannot be claimed that the Friedman rule is always optimal (or always non--optimal) on theoretical...

In this paper we study the welfare impact of alternative tax schemes on labor and capital. We evaluate the e_ect of lowering capital income taxes on the distribution of wealth in a model with heterogeneous agents, restricting our attention to policies with constant tax rates. We calibrate and...

We present voters' self-placement and 68 political party locations on the left-right dimension in 17 Latin American countries. Innovative calculations are based on data from Latinobarometer annual surveys from 1995 to 2002. Our preliminary analysis of the results suggests that most Latin...

We analyze risk sharing and fiscal spending in a two-region model with complete markets. Fiscal policy determines tax rates for each state of nature. When fiscal policy is decentralized, it can be used to affect prices of securities. To manipulate prices to their beneffit, regions choose...