Recent research has demonstrated that while government expenditures are countercyclical in most industrialized countries, they tend to be procyclical in developing countries. We develop a dynamic political-economy model to explain this phenomenon. Simulations of the model allow us to...

The paper studies the short run and long run effects of a production subsidy to the tourism sector of a small open economy, which can also be thought as a region within a country. We introduce a two-sector dynamic general equilibrium model where the tourism sector is considered to be...

This paper explores the dynamics of the Greek public debt. It supports that, first, the public debt is unsustainable and, second, the reduction in government expenditures and the cut in unit labour costs in the private sector seems to be the only available, al-though too little too late...

This paper studies optimal monetary and fiscal policy in a small open economy. Two forces in the economy impose orthogonal restrictions on financing costs across governments. The first force requires constant financing costs across governments to have time consistent optimal policy of hours. The...

This article reexamines the thesis that fiscal deficits cause trade deficits and challenges this explanation of the twin deficits with the following propositions. Differences in competitiveness among nations do not lead to balanced trade. Using a Eurozone case study, the article discusses the...

Origins and implications of twin deficits occurrence in a large scale of countries seems to be a center of rigorous empirical as well as theoretical investigation for decades. The reality of persisting fiscal and current account deficits became obvious in many advanced as well as advancing,...

This paper seeks to analyse the determinants of capital flight in selected Latin American countries throughout the 1990s, and gives some insights into what economic policies would be adequate under capital flight conditions. Finding, empirically, the saving rate to be a new determinant of...

The macroeconomic literature has found puzzling effects of government spending on private consumption, the real exchange rate and the terms of trade. Some authors find that private consumption increases after a shock to government spending, while others report a decrease. The same ambiguity can...

This paper tries to explain empirical causation between the exports and the real exchange rate. The paper develops a simple model, the model is based on the relationship of exports to: real interest rates differential, foreign demand for domestic goods and real exchange rate. The paper then...

The massive stocks of foreign exchange reserves, mostly held in the form of U.S. T-Bonds by emerging economies, are still an important puzzle. Why do emerging economies continue to willingly loan to the United States despite the low rates of return? We propose that a dynamic general equilibrium...