The decline in private savings since 1982 is arguably the most important problem in high debt countries. A reversal of the trend is essential if growth is to be restored. Three factors predominate : 1) the extent of intertemporal substitution; 2) attitudes toward risk; and 3) private/public...

Commodity stabilization funds are hard-currency savings to protect against a fall in income for commodity exports in the presence of borrowing constraints. The authors develop the optimal rules for deposits in and withdrawals from such a fund by using a benchmark model of precautionary savings...

Traditional specifications of money demand have commonly been plagued by persistent overprediction, implausible parameter estimates, andhighly autocorrelated errors. The authors argue that some of these problems stem from the failure to account for the impact of financial innovation. They...

Most models of economic growth are infinite horizon models that neglect the role of human capital in shaping life-cycle variables. This paper introduces training decisions in a life-cycle model to study the role of human capital both in life-cycle behavior and as an engine of growth. The crucial...

This paper estimates a monetary Euler system of a utility-maximizing representative consumer from two inflationary Latin American countries: Chile in the late seventies and Mexico in the early eighties. The results show that money is necessary to get reasonable parameters of the utility...

Aid is good for the poor. This paper uses detailed aid data spanning 60 developing countries over the past two decades to show that social aid significantly and directly benefits the poorest in society, while economic aid increases the income of the poor through growth. This new and unequivocal...

This paper examines support for reducing inequality and for income redistribution to specific groups in Europe and Central Asia. The paper uses the Life in Transition Survey to analyze cross-country differences in redistributive preferences and the determinants of individual-level differences in...

This paper presents a new methodology to measure inequality that optimally combines household survey information and tax records to construct a complete income distribution. Combining the two data sources is necessary because, on the one hand, household surveys do not accurately represent the...

Price and income elasticities estimated from a country's export demand function are used both to predict and to prescribe effective export strategies. But the focus on elasticities has led to the neglect of an important empirical regularity: a strong persistencein the growth rate of a country's...

The author provides theoretical and empirical evidence of a negative association between income inequality and real exchange rates. First, he builds a theoretical model showing the transmission mechanism from inequality to real exchange rates. Second, using cross-country data, he demonstrates...