This paper analyzes the scope for systematic rules-based fiscal activism in open economies. Relative to a balanced budget rule, automatic stabilizers significantly improve welfare. But they minimize fiscal instrument volatility rather than business cycle volatility. A more aggressively...

The impact of fiscal stimulus depends not only on short-term tax and spending policies, but also on expectations about offsetting measures in the future. This paper analyzes the effects of an increase in government spending under a plausible debt-stabilizing policy that links current stimulus to...

This paper focuses on the macroeconomic and budgetary impact of tax reforms in a New Keynesian two-country model. Our results show that both income and consumption unilateral tax rate reductions do not constitute a ""free lunch"", in the sense that they have negative budgetary consequences for...

We develop an extension of the open economy New Keynesian model in which agents are boundedly rational à la Gabaix (2020). Our setup nests rational expectations (RE) as a special case and it can successfully mitigate many "puzzling" aspects of the relationship between exchange rates and...

This paper investigates whether banking crises are associated with declines in bilateral exports. We first develop a simple open economy model in which banking crises translate into negative liquidity shocks, leading to collapses in exports through supply-side and demand-side shocks. We then...

This paper develops a full-fledged cost-benefit analysis of monetary integration, and applies it to the currency unions actively pursued in Africa. The benefits of monetary union come from a more credible monetary policy, while the costs derive from real shock asymmetries and fiscal disparities....

In this paper we develop a two-country dynamic general equilibrium model by means of which we seek to explain the long-run paths of a converging emerging market economy. We borrow a paradigm from the New Open Economy Macroeconomics literature and amend it to address specific features such as...

The experiences of Caribbean Economic Community countries show that exchange rate depreciation in these countries is inflationary, and that, while changes in the relative prices of tradables may affect exports, tourism, and imports, nominal exchange rate changes have no predictable effect on...

This paper provides a comprehensive assessment of the impact of NAFTA on growth and business cycles in Mexico. The effect of the agreement in spurring a dramatic increase in trade and financial flows between Mexico and its NAFTA partners, and its impact on Mexican economic growth and business...

Contents -- I. INTRODUCTION -- II. METHODOLOGY AND DATA -- III. DYNAMIC FACTORS AND EPISODES OF BUSINESS CYCLES -- IV. SOURCES OF BUSINESS CYCLE FLUCTUATIONS: 1960-2005 -- V. GLOBALIZATION AND THE EVOLUTION OF INTERNATIONAL BUSINESS CYCLES -- VI. SENSITIVITY EXPERIMENTS -- VII. CONCLUSION --...