The purpose of this paper is to explain the reluctance of developing countries to open up their capital market to foreigners, and the conditions inducing an emerging market economy to switch its policies. We consider an economy characterized initially by a one-sided openness to the capital...

This paper explains prices, output and employment adjustment In an open economy characterized by a monopolistic competitive market structure where goods prices are flexible while wages are determined by contracts that pre-set the wage path for several periods. The paper solves the rational...

The purpose of this paper is to address the role of endogenous default penalties that are contingent upon the intensity of default on the part of the borrowing nation, and to evaluate the effects of contingency plans that make the interest rate dependent upon variables that are correlated with...

constrains the move to the new sector. Thus, turbulent periods provide opportunities for structural shifts in favor of the new sector. The analysis assesses both the positive aspects of policies and the welfare costs associated with departures from fully flexible labor markets. It also discusses...

This paper describes an economy where incomplete information regarding the default penalty can result in an upward-sloping supply of credit.We evaluate the role of partial information and other related factors in determining the elasticity of supply of credit and the credit ceiling facing the...

The purpose of this paper is to explain price and output dynamics in an open economy characterized by a monopolistic competitive market structure in which pricing decisions incur costs. That lead producers to pre-set the price path for several periods. The paper derives an optimal pricing rule,...

This paper studies the optimal use of distortive policies aimed at raising a given real revenue, in a general equilibrium framework in which lump-sum taxes are absent. The policies analyzed are an inflation tax,commercial policy, and an implicit tax on capital inflows implemented by capital...

The purpose of this paper is to explain deviations from PPP in an economy charaterived by a mononolistic competitive market structure in which pricing decisions incur costs. That lead producers to pre-set the price path for several periods. The paper derives an optimal pricing rule, including...

The purpose of this paper is to compare the behavior of an economy subject to labor contracts with an economy where the labor market clears in an auction manner. Such a comparison is intended to reveal the information content of real wages in a flexible economy. The analysis reveals two distinct...

The purpose of this paper is to analyze an optimal pricing rule for the case in which the costs of price adjustment are time dependent, and where those costs depend positively on the magnitude of the percentage price change. By means of discrete time model, it is shown that the optimal response...