The standard procedure for analyzing transitional dynamics in non-linear macro models has been to employ linear approximations. This raises the central question of this paper: How reliable is this procedure in evaluating the dynamic adjustments to policy changes or structural shocks? This...

This paper examines the significance of the time path of a given productivity increase on growth and inequality. We show that whereas the time path impacts only the transitional path of aggregate quantities and has no effect on their ultimate steady-state levels, it has both transitional and...

We investigate the determinants of foreign borrowing costs in a stochastically growing economy. We find that these increase with the debt-wealth ratio, depending also upon the volatilities of domestic and foreign origin, and the length of debt contract. In addition, the sensitivity of the...

This paper employs an endogenous growth model to analyze the growth and inequality relation for a small open economy where agents differ in their initial endowments of capital stock and international bond-holdings. We analyze the impacts of different structural shocks through their effects on...

We construct a unified overlapping-generations (OLG) framework of equilibrium growth that includes the Blanchard �perpetual youth� model, the Samuelson model, and the infinitely-lived representative agent growth model as limit specifications of a �realistic�, two-parameter...

This paper analyzes the growth and inequality tradeoff for a small open economy where agents differ in their initial endowments of capital stock and international bond-holdings. Our analysis focuses on the distributional impacts of different structural shocks through their effects on...

Purpose – Recent research supports the role of productive government spending as an important determinant of economic growth. Previous analyses have focused on the separate effects of public investment in infrastructure and on investment in education. This paper aims to introduce both types of...

For a long time, the study of macroeconomics has focused almost exclusively on a closed economy and downplayed the role of international transactions. Today, however, researchers recognize that one cannot fully understand domestic macroeconomic relationships without considering the global...