This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential...

This paper provides new empirical evidence on the relationship between reservation wages of unemployed workers and macroeconomic factors--including the unemployment rate and generosity of the unemployment compensation system--as well as individual-specific determinants, such as human capital...

This paper assesses the responsiveness of wages and labor force movements to employment shocks across British and U.S. regions and across Europe using a multivariate vector autoregression technique. The paper finds inflexible real wages in all three areas in that each area’s real wage responds...

We show empirical evidence that there may not be a tradeoff between market income inequality and high sustained growth, which is key for poverty alleviation. We argue that the economies that achieved high sustained growth and low market income inequality are characterized by dynamism-a drive...

Finance and growth emerged as a distinct field of economics during the last three decades as economists integrated the fields of finance and economic growth and then explored the ramifications of the functioning of financial systems on economic growth, income distribution, and poverty. In this...

This paper explores the macroeconomic impact of social unrest, using a novel index based on news reports. The findings are threefold. First, unrest has an adverse effect on economic activity, with GDP remaining on average 0.2 percentage points below the pre-shock baseline six quarters after a...

We show that firms' market power dampens the response of their output to monetary policy shocks, using firm-level data for the United States and a large cross-country firm-level dataset for 14 advanced economies. The estimated impact of a firm's markup on its response to a monetary policy shock...

We develop a microfounded New Keynesian model to analyze monetary policy and financial stability issues in open economies with financial fragilities and weakly anchored inflation expectations. We show that foreign exchange intervention (FXI) and capital flow management tools (CFMs) can improve...

We analyze the causes of the apparent bias towards optimism in growth forecasts underpinning the design of IMF-supported programs, which has been documented in the literature. We find that financial variables observable to forecasters are strong predictors of growth forecast errors. The greater...