We study second-best macroeconomic policies for open economies subject to intertemporal sustainability problems and where agents may face liquidity constraints. If the private sector has biased expectations of future incomes, fiscal policies could offset the consequent distortions, according to...

Working on a sample of OECD countries spanning the period 1970-2003, this paper contributes to the Feldstein-Horioka literature by making three main innovations: (1) It estimates, for the first time, regressions at the institutional sector level (households, corporations, and government); (2) It...

This paper reviews the ideas introduced by Mundell (1961) about the formation of an optimal currency area (OCA). We discuss in detail the cost of fully giving up the exchange rate policy instrument and the benefits associated to having a one-currency area in a process of trade integration. Based...

This paper reviews the theoretical and empirical microeconomic literature on the effects of product market integration and internationalization of firms activities upon labor unions. It relates these issues to the European experience, indicating future lines of research in this field.