What is the basic economic decision-making unit? Is it the household or the extended family? This question is fundamental to economic analysis and policy design. The answer given by the Life Cycle and Keynesian models is that the economic unit is the household. According to these models, members...

This paper examines the bequest\gift behavior of altruistic parents who do not know their children's abilities and cannot observe their children's work effort. Parents are likely to respond to this information problem by making larger bequests to higher earning children and by using their...

This article demonstrates that Ricardian Equivalence does not necessarily hold in models with altruistic transfers once one takes into account the strategic behavior of recipients as well as donors. To influence the final allocation of consumption in altruistic settings, potential recipients can...

We investigate the choice of exchange-rate regime fixed or floating in a dynamic, intertemporal general equilibrium framework. Our framework extends Devereux and Engel (1998) by investigating the implications of internationalized production. We examine the role of price-setting -- whether prices...

This paper develops a welfare-based model of monetary policy in an open economy. We focus on the extent to which monetary policy should be employed in maintaining the exchange rate. The traditional approach maintains that exchange rate flexibility is desirable in the presence of real...

The macroeconomic analysis of fiscal policy is usually based on one of two canonical models--the Barro-Ramsey model of infinitely-lived families or the Diamond-Samuelson model of overlapping generations. This paper argues that neither model is satisfactory and suggests an alternative. In the...

This paper explores the implications of the European single currency within a simple sticky price intertemporal model. The main issue we focus on is how the euro may alter the responsiveness of consumer prices to exchange rate changes. Our central conjectures is that the acceptance of the euro...

This paper develops, calibrates, and simulates a dynamic 88-period OLG model to study the intergenerational transmission of U.S. wealth inequality via bequests. The model features marriage, realistic fertility patterns, random death, assortative mating based on skills, heterogeneous skill...

This paper investigates the behavior of the foreign exchange risk premium in two recent two-country intertemporal-optimizing general equilibrium models with sticky nominal prices: Obstfeld-Rogoff (1998) and Devereux-Engel (1998). The foreign exchange risk premium in any general equilibrium model...

Fluctuations in real GNP have traditionally been viewed as transitory deviations from a deterministic time trend. The purpose of this paper is to review some of the recent developments that have led to a new view of output fluctuations and then to provide some additional evidence. Using post-war...