Economic shocks often permeate borders generating comovement in nations' business cycles over time. We highlight the fact that fiscal policy coordination is an important avenue by which national economies become more integrated, influencing the transmission of macroeconomic shocks between...

This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank, and that their sovereign partially backs up any...

It has been shown that extending the Calvo model to account for the heterogeneity in price stickiness suggested by the micro-evidence significantly improves the performance of the model. In the new model, price-changing firms are chosen disproportionately from sectors with more flexible prices....

This paper presents empirical evidence against the popular perception that macro volatility is exogenous. We obtain tax effects on macro aggregates in the stochastic neoclassical model. Taxes are shown to affect the second moment of output growth rates without affecting the first moment....

Serial correlation in macroeconomics is pervasive. Macroeconomic modellers find it impossible to model this feature without relying on serially correlated shocks. Using a behavioral macroeconomic model, I show that serial correlation in inflation and output can easily be explained in the context...

International trade policy analysis has tended to focus on the production side of general equilibrium, with policies such as a tariff or carbon tax affecting international and internal income distributions through a Heckscher-Ohlin nexus of factor intensities and factor endowments. Here I move...

How costly are sovereign debt crises? In this paper we study output losses during sovereign default and debt renegotiation episodes since 1980. In contrast to previous work, we account for the severity of default and not only for its occurrence. Specifically, we distinguish between “hard”...

We model an overlapping-generations economy with two skill levels: skilled and unskilled. The welfare-state is modeled simply by a proportional tax on labor income to finance a demogrant in a balanced-budget manner. Therefore, some (the unskilled workers and old retirees) are net beneficiaries...

We consider firms and multi-member households operating in a competitive market environment. Households are endowed with resources (commodity bundles) and shares of firm ownership. Household members are characterized by individual preferences, possibly with intra-household consumption...