This paper explores the similarity of the underlying economic problems that lead to the establishment of (a) independent central banks to operate national monetary policies and (b) independent regulatory agencies for telecommunications and other utility service industries. We show that, in both...

We contribute to a recent literature on the normalization, calibration and estimation of CES production functions. The problem arises because CES 'share' parameters are not in fact shares, but depend on underlying dimensions - they are 'dimensional constants' in other words. It follows that such...

We analyse the effects of a government spending expansion in a dynamic stochastic general equilibrium (DSGE) model with Mortensen-Pissarides labour market frictions, deep habits and a constant-elasticity-of-substitution (CES) production function. The combination of deep habits and CES technology...

Dynamic principal-agent settings with asymmetric information but no commitment are well known to create a ratchet effect. Here, the most efficient agents must be provided with extra 'information rent' as an incentive to relinquish their informational advantage over an uninformed principal; this...

How does informality in emerging economies affect the conduct of monetary policy? To answer this question we construct a two-sector, formal-informal new Keynesian closed-economy. The informal sector is more labour intensive, is untaxed, has a classical labour market, faces high credit...

A New-Keynesian model with deep habits and optimal monetary policy delivers a fiscal multiplier above one and the crowding-in effect on private consumption obtainable in a Real Business Cycle model à la Ravn et al. (2006). Optimized Taylor-type or price-level interest rate rules yield...

We develop a closed-economy DSGE model of the Indian economy and estimate it by Bayesian Maximum Likelihood methods using Dynare. We build up in stages to a model with a number of features important for emerging economies in general and the Indian economy in particular: a large proportion of...

We explore the costs and benefits of informality associated with the informal sector lying outside the tax regime in a two-sector New Keynesian model. The informal sector is more labour intensive, has a lower labour productivity, is untaxed and has a classical labour market. The formal sector...

The UK, with its relatively liberal immigration policies following recent enlarge- ments, has been one of the main recipients of migrants from new EU member states. This paper poses the questions: what is the effect of immigration on a receiving econ- omy such as the UK? Is the effect beneficial...

A time-inconsistency problem in regulation often results in under-investment es- pecially where there are high sunk costs in network industries such as electricity, gas, telecommunications and water. This paper provides a new perspective on this ‘hold-up’ problem facing the price regulation...