In this paper we derive the correct solution of optimal closure of the state sector studied in Section 6.4 of Aghion and Blanchard (1994). Aghion and Blanchard only present an 'approximate' solution which entails a constant unemployment rate in what they call a turnpike approximation. We show...

The New Economy should not be discounted as a temporary stock market phenomenon, but should be recognized as a real and sustainable phenomenon. The basic feature of the transition towards the New Economy is the rising importance of information—both as output and input good—in virtually all...

So far the contribution of New Economic Geography (NEG) has been mainly positive. Normative analysis and policy implications have lagged behind. The reason is the fear of the consequences of taking too literally the neat structure of the models. Under this respect the somewhat incautious aim of...

Policy interventions in large open economies do not only affect the allocation of domestic resources but change international market prices. The change in international prices implies an indirect secondary burden or benefit for all trading countries. This secondary terms of trade effect may have...