We study the impact of an anticipated "baby boom" in an overlapping generations economy. The rise of the working population lowers the wage, and the high demand for assets causes a rise in the price of capital which will be reversed when the baby boomers leave the work-force. However, the swings...

In this paper, we demonstrate that the influence of monopolistic competition in the product market on an economy's impact response to fiscal shocks depends on the persistence of these shocks. While short-lived increases in lump-sum financed government expenditure have a stronger effect on labor...

We consider an economy in which a political-support maximizing government takes into account different generations' preferences when deciding how much to borrow abroad and how much to spend on public consumption and investment. We show that, in equilibrium, the government's choices are shaped by...

It is often argued that a saticfactory institutional quality is prerequi- site for successfull financial integration. This paper analyzes the influence of financial integration on institutional quality. We construct a dynamic politico-economic model in which the ruling elite uses its political...

We explore how the share of the private sector in total external debt affects perceived creditworthiness and the likelihood of sovereign default in developing countries. While there are theoretical arguments both in favor and against a stabilizing role of private-sector borrowing, the evidence...

We present a two-armed bandit model of decision making under uncertainty where the expected return to investing in the "risky arm'' increases when choosing that arm and decreases when choosing the "safe'' arm. These dynamics are natural in applications such as human capital development, job...

This paper offers an explanation why most democracies are characterized by moderate taxation of wealth although the wealth distribution is persistently skewed to the right. We model an economy in which agents have to acquire higher education to qualify for skilled work and in which capital...