There exists a positive correlation between an economy's exposure to international trade and the size of its government. The correlation holds for most measures of government spending, in low- as well as high-income samples, and is robust to the inclusion of a wide range of controls. One...

This paper presents first the estimation of a two-country DSGE model for the euro area and the rest-of-the-world including relevant oil-price channels. We then investigate the optimal resolution of the policy tradeoffs emanating from oil-price disturbances. Our simulations show that the...

We consider a frictional labor market in which firms want to insure their senior employees against income fluctuations and, at the same time, want to recruit new employees to fill their vacant positions. Firms can commit to a wage schedule, i.e. a schedule that specifies the wage paid by the...

Using a general two-stage framework, this paper gives sufficient conditions for increasing competition to have negative or positive effects on R&D-investment, respectively. Both possibilities arise in plausible situations, even if one uses relatively narrow concepts of increasing competition....

This paper compares the interpolation abilities of nonparametric and parametric term structure models which are widely used by the main Central Banks of the world. Seeking the combination of smoothness and flexibility, a new Nelson-Siegel class model is introduced. It emerges as an extension of...

This paper compares the in sample fitting and the out of sample forecasting performances of four distinct Nelson-Siegel class models: Nelson-Siegel, Bliss, Svensson, and a five factor model we propose in order to enhance the fitting flexibility. The introduction of the fifth factor resulted in...

This paper presents an optimization model for the selection of sets of clients that will receive an offer for one or more products during a promotion campaign. The complexity of the problem makes it very difficult to produce optimal solutions using standard optimization methods. We propose an...

Discussing fundamental issues on the ethical foundation of public economic policy, this paper arrives at conclusions that will surprise most economists. While reviewing relevant contributions, it argues for happiness as the ultimate objective, in contrast to economists' preference for...

This paper re-examines the optimal tax design problem (income and commodities) in the presence of externalities. The nature of the second-best, and the choice of the tax instruments, are motivated by the informational structure in the economy. The main results are: (i) environmental levies...