Governments in emerging markets often behave like a quot;tormented insurer,quot; trying to use non-state-contingent debt instruments to avoid cuts in payments to private agents despite large fluctuations in public revenues. In the data, average public debt-GDP ratios decline as the variability...

We contribute to the debate on the macroeconomic effects of fiscal stimuli by showing that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a...

We develop a stylized EU-type model of a union consisting of rich, capital-abundant and high productivity countries, and poor, capital-scarce and low productivity countries. We address two main issues: the efficiency of tax competition and the effect of factor mobility on the size of the welfare...

The aging of the population shakes the confidence in the economic viability of pay-as-you-go social security systems. We demonstrate how in a political-economy framework the shaken cofidence leads to the downsizing of the social security-system, and to the emergence of supplemental individual...

International-capital market integration has become a key policy issue in the prospective integration of Europe of 1992. In this context this paper provides a theoretical analysis of the effects of relaxing restrictions on the international flow of capital on the fiscal branch of government: the...

We develop a framework in which the host country productivity has a positive effect on the intensive margin (the size of FDI flows), but only an ambiguous effect on the extensive margin (the likelihood of FDI flows to occur). The source-country productivity has a negative effect on the extensive...

A positive productivity shock in the host country tends typically to increase the volume of the desired FDI flows to the host country, through the standard marginal profitability effect. But, at the same time, such a shock may lower the likelihood of making any new FDI flows by the source...

The paper brings out the special mechanism through which taxes influence bilateral FDI, when investment decisions are two-fold in the presence of fixed setup flows costs. For each pair of source-host countries, there is a set of factors determining whether aggregate FDI flows will occur at all,...

The paper develops a model with lumpy setup costs of new investment, which govern the flows of FDI. Foreign investment decisions are two-fold: whether to export FDI and, if so, how much. The first decision is governed by total profitability considerations, whereas the second is governed by...

How high can public debt rise without compromising fiscal solvency? We answer this question using a stochastic ability-to-pay model of sovereign default in which risk-neutral investors lend to a government that displays "fiscal fatigue," because its ability to increase primary balances cannot...