The fundamental importance of economic institutions for economic growth through their impact on technological change has been argued, reconfirmed by recent empirical studies, but not examined theoretically. This paper tries to fill that gap. In the model proposed, economic growth is affected by...

We provide a model of contagion where countries borrow or lend for consumption smoothing at the market interest rate or a lower IMF rate. Highly indebted countries hit by large negative shocks to output will default. The resulting reduction in loanable funds raises interest rates, increases the...

The paper provides an alternative explanation for the ""resource curse"" based on the income effect resulting from high government current spending in resource rich economies. Using a simple life cycle framework, we show that private investment in the non-resource sector is adversely affected if...