This paper constructs and analyzes an optimizing model of a highly-indebted small open economy. An important innovation in the model is the incorporation of sovereign risk through the specification of an upward-sloping foreign debt supply function. The model is used to examine the interaction...

This paper characterizes the effects of reserve requirements on financial loans in the presence of moral hazard on the lender side and sovereign risk on the borrower side. The impacts of such reserve requirements on the equilibrium default risk and borrowing are analyzed and their welfare...

This paper analyzes the effects of monetary and fiscal policy shocks on the term structure of interest rates. The effects of temporary versus permanent, unanticipated versus anticipated, policy disturbances and the responses of long versus short, and real versus nominal, rates are contrasted....

This book brings together a number of contributions in growth theory and macroeconomic dynamics that reflect recent developments and the ongoing debate over the relative merits of neo-classical and endogenous growth models. It focuses on three important aspects that have been receiving...

How do capital income taxes affect household portfolio choice and growth? Wequot; approach this question within the context of a stochastic model of a small open economy inquot; which taxes on income from domestic capital (equity) and foreign bonds affect householdquot; portfolio choice, welfare...