The paper considers the response of a small, open dependent economy to a variety of fiscal and financial shocks. It also examines the influence of alternative budget-balancing rules on the response of the economy to external shocks, such as a change in the world interest rate. The approach...

This paper surveys the recent literature on the theory of macroeconomic policy. We study the effect of various incentive constraints on the policy-making process, such as lack of credibility, political opportunism, political ideology, and divided government. The survey is organized in three...

This paper analyzes empirically the effect of spatial agglomeration of activities on the productivity of firms using French individual firm data from 1996 to 2004. This allows us to control for endogeneity biases that the estimation of agglomeration economies typically encounters. French firms...

Many countries, both industrialized and developing, appear to have experienced a slowdown in economic growth. We examine a large sample of countries and find that a majority exhibit a significant structural break in their post-war growth rates. In nearly all of these cases the break was followed...

This paper reformulates the well known financial development conjecture (FDC) and supplies some new empirical evidence in its favour. The financial development conjecture, namely, that there exist strong feedback effects between real and financial development, is described in this paper by use...

Exchange rate behavior is analyzed in the context of a stochastic rational expectations model in which there are random shocks to the price setting mechanism and in which the authorities choose to impose either nominal or real exchange rate bands. Results are compared to those that emerge from a...

Investment in research and development (R&D) affects a country's total factor productivity. Recently new theories of economic growth have emphasized this link and have also identified a number of channels through which a country's R&D affects total factor productivity of its trade partners....

This paper develops a dynamic continuous-time model in which international risk sharing can yield substantial welfare gains through its positive effect on expected consumption growth. The mechanism linking global diversification to growth is an attendant world portfolio shift from safe, but...

How many years will the average transition economy need to reach the income level of the average OECD country? The favoured methodology in use to answer such questions is referred to as the BLR approach, because it uses specifications from Barro, and Levine and Renelt. The literature has so far...

This paper is intended to make four main points that are relevant for previously planned economies in transition to a market economy. First, national output can be increased by reducing or eliminating relative price distortions through price reform and free trade and by thus enhancing...