The paper develops a simple stochastic new open macroeconomic model in which pricesetting firms' choice between producer currency pricing and local currency pricing is endogenous. We show that, in equilibrium, firms will denominate their export price contracts in the currency of the country with...

Almost all theoretical work on how to calculate the marginal deadweight loss has been done for linear taxes and for variations in linear budget constraints. This is quite surprising since most income tax systems are nonlinear, generating nonlinear budget constraints. Instead of developing the...

The first aim of this paper is to clarify the differences and rela-tionships between cumulative advantage/disadvantage and the Matthew ef-fect. Its second aim, which is also its main contribution, is not only to present a new measure of the Matthew effect, but also to show how to esti-mate this...

This paper deals with the consequences of the assumption of negatively interdependent preferences for the shape of the optimal nonlinear income tax and the effcient level of public good provision in a setting where the policy maker maximizes an inequality averse social welfare function and the...

The paper extends Ng's (1987) model of optimal taxation of diamond goods - goods that are valued solely for their costliness. We extend his findings by analyzing how other goods should be taxed in the presence of pure diamond goods; modified Ramsey rules are derived in a basic single-type model...

Financial intermediation and bank spreads are important elements in the analysis of business cycle transmission and monetary policy. We present a simple framework that introduces lending relationships, a relevant feature of financial intermediation that has been so far neglected in the monetary...

We show that a so-called expectations-based optimal monetary policy rule has desirable properties in a standard New Keynesian model augmented with a cost channel and inflation rate expectations that are partly backward-looking. In particular, optimal monetary policy under commitment is...

Staggered prices are a fundamental building block of New Keynesian dynamic stochastic general equilibrium models. In the standard model, prices are uniformly staggered but recent empirical evidence suggest that deviations from uniform staggering are common, This paper analyzes how...

This paper analyzes the role of product quality and labor efficiency in shaping the trade patterns and trade intensities within and across two groups of countries, the developed and richer North and the developing South. Taking prices as a proxy for quality, recent empirical literature...