This paper studies dynamics of endogenous business cycles and exchange rate volatility in a small open economy. Without market imperfections, domestic price and wage adjustments respond sluggishly to disequilibrium situations on real domestic markets while prices on international capital markets...

Two macro models one for a closed economy and the other for a small open economy are used to examine the scope for income redistribution and employment creation. In particular, the introduction of both a guaranteed annual income (basic income) and an employment subsidy are examined, and these...

This paper analyses the optimal taxation of dividends and other types of income from portfolio investment. We show that, in an open economy, it is not desirable to offer double taxation relief for dividends paid by domestic firms to domestic households. This result holds for fairly general...

This paper examines the role of external shocks in explaining macroeconomic fluctuations in African countries. We construct a quantitative, stochastic, dynamic, multi-sector equilibrium model of a small open economy calibrated to represent a typical African economy. In our framework, external...

We consider the evolution of preferences when trade occurs between two countries. We show that if one country is much larger than the other, its preferences can eventually take over the preferences of the second country. This result may provide an explanation of why small countries sometimes...

The choice of an exchange rate peg often points to a trade-off between gaining credibility and losing flexibility. We show that the flexibility loss may be reduced if domestic and foreign shocks are coorelated and more volatile. Allowing for a plausible structural change after a peg, a...

We study optimal savings in continuous time with exogenous transitions between employment and unemployment as the only source of uncertainty in a small open economy. We prove the existence of an optimal consumption path. We exploit that the dynamics of consumption and wealth between jumps can be...

We construct a dynamic model of a small open economy to analyze the effects of large energy subsidies. The model includes domestic energy production and consumption, trade in energy at world market prices, as well as private and public sector production. The model is calibrated to Egypt and used...

We address the question of whether growth and welfare can be higher in crisis prone economies. First, we show that there is a robust empirical link between per-capita GDP growth and negative skewness of credit growth across countries with active financial markets. That is, countries that have...

In this paper fiscal policy is examined for an open economy characterised by unemployment due to efficiency wages. We allow for capital and firm mobility in a model where the government chooses the level of wage, source-based capital and profit taxation. The taxing choices of governments are...