Since the start of the financial crisis, industrial country public debt levels have increased dramatically. And they are set to continue rising for the foreseeable future. A number of countries face the prospect of large and rising future costs related to the ageing of their populations. In this...

This paper computes welfare-maximizing monetary and tax policy feedback rules in acalibrated dynamic general equilibrium model with sticky prices. The government makesexogenous final good purchases, levies a proportional income tax, and issues nominalone-period bonds. A quadratic approximation...

This paper revisits the role played by myopia in generating a theoreticalrationale for pay-as-you-go social security in dynamically efficient economies.Contrary to received wisdom, if the real interest rate is exogenously fixed, enough myopiamay justify public pensions but never alongside...

This paper revisits the issue of the optimal exchange rate regime in a flexible price environment. The key innovation is that we analyze this question in the context of environments where only a fraction of agents participate in asset market transactions (i.e., asset markets are segmented)....

In this paper, we investigate how changes in the skill mix of local labor supply are absorbedby the economy. We distinguish between three adjustment mechanisms: through factorprices, through an expansion in the size of those production units that use the moreabundant skill group more...

We propose a simple model of trade outside the law preyed on by robbers and possiblyprotected by private cops. We establish the conditions for trade collapse, secure trade andinsecure trade. Endogenous predation and enforcement can explain both puzzling failures ofcommonly observed state...

This paper shows empirically that China's trade balance is sensitive to fluctuations in the real effective exchange rate of the renminbi. However, the current size of the trade surplus is such that exchange rate policy alone will probably not be able to address the imbalance. The potential...

This paper develops a monopolistic competition model with heterogeneous firms tostudy the interaction between technology adoption and trade in a world of two countriesfacing different technology adoption costs. It shows that a reduction in the technologyadoption cost in one country increases the...

This paper develops a fully-endogenous, variety-expansion growth model with firm-specific quality heterogeneity, limit pricing, and an endogenous distribution of markups.Trade induces only firms with high-quality products to export, whereas firms with low-quality products serve only the domestic...

We look at disaggregated imports of various types of equipment to make inferences oncross-country differences in the composition of equipment investment. We make threecontributions. First, we document strikingly large differences in investment composition.Second, we explain the differences as...