This paper analyses whether sovereign default episodes can be seen as contingencies of optimal international lending contracts. The model considers a small open economy with capital accumulation and without commitment to repay debt. Taking first order approximations of Bellman equations, I...

Executive stock options reward success but do not penalise failure. In contrast, the standard principalagent model implies that pay is normally monotonically increasing in performance. This paper shows that, under loss aversion, the use of carrots but not sticks is a feature of an optimal...

Compensation schemes often reward success but do not penalize failure. Fixed salaries with stock options or bonuses have this feature. Yet the standard principal–agent model implies that pay is normally monotonically increasing in performance. This paper shows that, under loss aversion, there...

This paper analyses predictions of a simple model of currency crises in which the peg will be abandoned when the currency overvaluation hits a certain threshold, unknown to the agents. Due to learning about the threshold, some features usually observed in the data and identified with models with...

The paper explores the determination of foreign direct investment (FDI) into the Balkan transition economies – Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Montenegro, Romania and Serbia. Detailed FDI inflows to Southeast Europe (SEE) are analysed to determine the main...

This paper develops a theory of technology transfer when technology is embodied in human capital and learning requires on-the-job communication between managers and workers. Patterns of knowledge diffusion depend on where high knowledge managers work and how much time they allocate to training...

Work of low-skilled migrant workers from developing countries in developed economies is a growing phenomenon and a key political and economic issue. An extensive literature has found (for the most part) that these workers come from the lower part of the skill distribution. This paper revisits...

This paper presents a model with monopolistic competition, productively heterogeneous firms, and business cycle aggregate shocks. With firm-specific productive heterogeneity, weaker firms quit when faced with a negative aggregate shock. Consequently, trade does not always increase firm-level...

The processes of building the United States of America (USA) during the nineteenth century and the European Union (EU) since mid-twentieth century are among the major claims for the possibility of a vast, ‘imperial’-size political unit based on democratic principles. The crucial period for...