A common assumption in standard economic models is that agents are risk-averse and prudent, and it is often argued that prudence is necessary to generate precautionary savings. This paper shows that prudence is not necessary to generate precautionary savings in small open economy models with...

This paper explores the hypothesis that the propensity to consume out of income is not constant but varies, perhaps in a nonlinear fashion, with fiscal variables. It examines whether there is any empirical evidence to support the hypothesis that households move from non-Ricardian to Ricardian...

We undertake a quantitative analysis of the dispersion of current accounts in an open economy version of incomplete insurance model, incorporating important market frictions in trade and financial flows. Calibrated with conventional parameter values, the stochastic stationary equilibrium of the...

In countries such as the Soviet Union, where wealth is mainly stored in monetary assets, the behavior of the money to income ratio is a poor indicator of the growth of undesired monetary balances (monetary overhang). In those countries a monetary overhang is primarily a wealth overhang, which...

This paper studies the volatility of consumption relative to output in the context of a simple general equilibrium model of a small open economy subject to exogenous shocks in productivity. With infinite horizons and exogenous relative prices, the model generates variance estimates that are well...

A method of testing the relative importance for consumption of risk sharing behavior and changes in current income is proposed and estimated using data across Canadian provinces. The focus of the estimation is less on whether or not the risk sharing model can be rejected than on how much each of...

This paper offers a discussion about the macroeconomics of exhaustible resources. In a resource-based economy, long-term sustainability is an obvious issue. This paper outlines some ideas on how to treat issues related to exhaustible resources in a macroeconomic context. Based on a small dynamic...