Using data from more than 100 economies for the period of 1975 to 2005, we conduct an extensive empirical analysis of the determinants of international reserve holdings. Four groups of determinants, namely, traditional macro variables, financial variables, institutional variables, and dummy...

The conventional view, as expounded by sticky-price models, is that price adjustment determines the PPP reversion rate. This study examines the mechanism by which PPP deviations are corrected. Nominal exchange rate adjustment, not price adjustment, is shown to be the key engine governing the...

We estimate the effect of political regime transitions on growth with semi-parametric methods, combining difference in differences with matching, that have not been used in macroeconomic settings. Our semi-parametric estimates suggest that previous parametric estimates may have seriously...

This article studies the equivalence between labor and consumption taxes in a stochastic context, where the government can undertake an active portfolio management strategy by investing in both risk-free and risky assets. Using a two-period model we show that such taxes let consumers make the...

In this article, we have used a continuous EBIT-based model to study deferred taxation under default risk. Quite surprisingly, default risk has been disregarded in research on deferred taxation. In order to underline its importance, we first calculated the probability of default, over a given...

The well-known Johansson-Samuelson Theorem proves that, in partial equilibrium, comprehensive income taxation with a uniform tax rate is neutral in terms of investment decisions, if fiscal depreciation allowances coincide with economic depreciation. In this article we show that this result does...

This paper shows that taxes which are understood to be neutral with respect to the marginal investment decisions may be distortionary with respect to entrepreneurial decisions. In particular, we apply an intertemporal model to show that a comprehensive income tax is distortionary unless all...

We explore the role of interest rate policy in the exchange rate determination process. Specifically, we derive exchange rate equations from interest rate rules that are theoretically optimal under a few alternative settings. The exchange rate equation depends on its underlying interest rate...

This article studies the effects of tax competition on the provision of public goods under business risk and partial irreversibility of investment. As will be shown, the provision of public goods changes over time and also depends on the business cycle. In particular, under source-based...