We study the robustness of the Lerner symmetry result in an open economy New Keynesian model with price rigidities. While the Lerner symmetry result, i.e. the absence of allocative and trade-flow effects of an equally-sized change in import tariff and export subsidy, holds up approximately for a...

We study the robustness of the Lerner symmetry result in an open economy New Keynesian model with price rigidities. While the Lerner symmetry result of no real effects of a combined import tariff and export subsidy holds up approximately for a number of alternative assumptions, we obtain...

We study the macroeconomic implications of the debt overhang distortion. In our model, the distortion arises because investment is noncontractible—when a firm borrows funds, the debt contract cannot specify or depend on the firm’s future level of investment. After the debt contract is...

Labor market informality is a pervasive feature of most developing economies. Motivated by the empirical regularity that the labor informality rate falls with GDP per capita, both at business cycle frequency and in a cross-section of countries, and that the Okun's coefficient falls with the...

We assess the extent to which the great US macroeconomic stability since the mid-1980s can be accounted for by changes in oil shocks and the oil share in GDP. To do this we estimate a DSGE model with an oil-producing sector before and after 1984 and perform counterfactual simulations. We nest...

We study the macroeconomic implications of the debt overhang distortion. In our model, the distortion arises because investment is noncontractible - when a firm borrows funds, the debt contract cannot specify or depend on the firm's future level of investment. After the debt contract is signed,...