A big challenge for the economic development of small island countries is dealing with external shocks. The Pacific Islands are vulnerable to natural disasters, climate change, commodity price changes, and uncertain donor grants. The question that arises is how should small developing countries...

Using panel data from 120 developing countries from 1975 to 2000, this paper explores the direct and indirect channels linking social spending, human capital, and growth in a system of equations. The paper finds that both education and health spending have a positive and significant direct...

Most macroeconomic models assume that aggregate output is generated by a specification for the production function with total physical capital as a key input. Implicitly this assumes that private and public capital stocks are perfect substitutes. In this paper we test this assumption by...

We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labor productivity is affected by country-specific climate variables-defined as deviations of temperature and precipitation from their historical norms. Using a panel data...

In the last few decades, real GDP growth and investment in advanced countries have declined in tandem. This slowdown was not the result of weak demand (there has been no shift along the Okun curve), but of a decline in potential output growth (which has shifted the Okun curve to the left). We...

This paper offers empirical evidence that greater financial inclusion of small and medium enterprises (SMEs) can promote higher economic growth and employment, especially in the Middle East and Central Asia regions. First, we show that countries with higher SME financial inclusion exhibit more...

An asset bubble relaxes collateral constraints and increases borrowing by credit-constrained agents. At the same time, as the bubble deflates when constraints start binding, it amplifies downturns. We show analytically and quantitatively that the macroprudential policy should optimally respond...

We explore the extent to which macroeconomic policies, structural policies, and institutions can mitigate the negative relationship between temperature shocks and output in countries with warm climates. Empirical evidence and simulations of a dynamic general equilibrium model reveal that good...

We study the costs of hospitalizations on patients' earnings and labor supply, using the universe of hospital admissions in Denmark and full-population tax data. We evaluate the quality of treatment based on its ability to mitigate the labor market consequences of a given diagnosis and propose a...

Output gap estimates are widely used to inform macroeconomic policy decisions, including in Korea. The main determinant of these estimates is the measure of labor market slack. The traditional measure of unemployment in Korea yields an incomplete estimate of labor market slack, given that many...