What went wrong? Why did seemingly rational bond investors continue to purchase Puerto Rican debt with only a modest risk premium, even though the macroeconomic fundamentals were dismal? Why did financial markets fail to exercise market discipline and restrict capital flows to Puerto Rico? Given...

We study the conditions under which fiscal foresight – forward-looking agents anticipating future policy changes – results in perverse economic behavior through unintended intertemporal tradeoffs. Somewhat surprisingly, fiscal foresight by itself is far from sufficient for policy-induced...

The possibility of creating a state bank has received much recent attention in the United States. In 2021, six states introduced legislation to create a state bank; in 2019, similar legislation was enacted in California for municipal banks. This paper develops a framework to evaluate state...

This paper studies the marginal product of private capital (MPK) with new data and a new framework to obtain a better understanding of international capital allocations and the Lucas Paradox (LP). Our point of departure is three influential studies of MPK's and, based on the most recently...

This paper reviews selected fiscal policy initiatives undertaken by US states to encourage job creation and innovation. We begin with a discussion of some general considerations about the design of tax policies summarized in a tax policy design table. Four policies are reviewed: job creation tax...

Market power exercised by firms has become central to macroeconomics. Recent theoretical work highlights the importance of the relation between market power and inflation. We examine this relation for individual firms in eleven U.S. industries. Our econometric framework exploits restrictions...

The elasticity of substitution between capital and labor features prominently in several areas of economic research. However, a consensus estimate remains elusive. We develop an estimation strategy that filters panel data in an original way and avoids several pitfalls - difficult-to-specify...

The possibility of creating a state bank has received much recent attention in the United States. In 2021, six states introduced legislation to create a state bank; in 2019, similar legislation was enacted in California for municipal banks. This paper develops a framework to evaluate state...

This paper reviews selected fiscal policy initiatives undertaken by US states to encourage job creation and innovation. We begin with a discussion of some general considerations about the design of tax policies summarized in a tax policy design table. Four policies are reviewed: job creation tax...

We study the conditions under which fiscal foresight – forward-looking agents anticipating future policy changes – results in perverse economic behavior through unintended intertemporal tradeoffs. Somewhat surprisingly, fiscal foresight by itself is far from sufficient for policy-induced...