In an economy with a debt overhang, investment depends on expected tax rates. On the other hand, expected tax rates depend on the debt’s face value. Therefore investment depends on the face value of debt. I show that this may lead to a positive or negative association between debt and...

This paper provides empirical evidence on the determinants of long-term growth performance in a sample of 55 developing countries grouped by income levels. The evidence indicates that a model incorporating the savings rate, export performance, expenditures on human capital development, the...

The paper proposes a new welfare-based measure to evaluate the distributive effects of public programs. The proposed measure differs from traditional approaches in two important ways: first, it is based on life-cycle considerations, since most public expenditure programs have an intertemporal...

This paper uses a simple model to analyze the forces that determine the size of the public sector and the quality of workers employed in that sector. Workers are heterogeneous, and the public sector chooses an employment strategy that maximizes a social welfare function U(s, Y) that depends on...

We provide a framework for analyzing the choice between optimal and robust monetary policy rules in the presence of paradigm uncertainty. We first discuss the conditions on uncertainty that render a robust rule preferable to an optimal rule. Second, we show how the degree of risk aversion of the...

Effects of different policy rules are simulated: uncoordinated targeting of the money supply or nominal income, use of monetary policy to achieve coordinated targets for nominal or real exchange rates, and the use of monetary and fiscal policies to hit targets for internal and external balance....

This paper proposes reforms to the discount rates used by the Bank and the Fund to (a) calculate the present value (PV) of the external debt of low-income countries (LICs) in debt sustainability analyses (DSAs) and (b) to calculate the grant element of individual loans. Consistent with the...

In addition to transferring about 16 percent of GDP from exporters to importers, Uzbekistan’s quasi-fiscal multiple exchange rate regime generates identifiable welfare losses of 2-8 percent of GDP on import markets and up to 15 percent on export markets. These excess burdens have increased...