We consider a standard New Keynesian model of a small open economy with nominal rigidities and study optimal capital controls. Consistent with the Mundellian view, we find that the exchange rate regime is key. However, in contrast with the Mundellian view, we find that capital controls are...

We study cross-country insurance for members of a currency union using an open economy model with nominal price and wage rigidities. We provide two results that build the case for the creation of a fiscal union within a currency union. First, we show that, if financial markets are incomplete,...

We consider a dynamic Mirrlees economy in a life cycle context and study the optimal insurance arrangement. Individual productivity evolves as a Markov process and is private information. We use a first order approach in discrete and continuous time and obtain novel theoretical and numerical...

A Positive Theory of Capital Taxation

Abstract We analyze the role of the gap r-g between the return of return on capital r and the growth of the economy g rate in a political economy model of bequest taxation. Higher values of r-g lead to higher wealth inequality, and higher and more progressive optimal taxes on bequest. These...

We develop a theory of optimal estate taxation in a model where bequest inequality is driven by differences in parental altruism. We show that a wide range of results are possible, from positive taxes to subsidies, depending on redistributive objectives implicit in the cardinal specification of...

We study the effects of labor mobility within a currency union suffering from nominal rigidities. When the demand shortfall in depressed region is mostly internal, migration may not help regional macroeconomic adjustment. When external demand is also at the root of the problem, migration out of...

efficiency gains can be sizable, but we find that most of the improvements can then attributed to the relaxation of borrowing constraints, rather than the introduction of savings distortions.

We explore steady-state inequality in an intergenerational model with altruistically linked individuals who experience privately observed taste shocks. When the welfare function depends only on the initial generation, efficiency requires immiseration: inequality grows without bound and...