This paper presents some examples of regular dynamic economies with externalities and taxes that either lack existence of a Markov equilibrium or such equilibrium is not continuous. These examples pose further challenges for the analysis and computation of these economies. JEL Classification:...

This paper uses consumption data to estimate the trend growth rate for the “new economy.'' The analysis starts with the assumption that a trend break in GDP should be accompanied by a trend break in consumption. But because consumption is forward looking and smoother than GDP, it should be...

It is well known that there are big cross-country differences in aggregate TFP. Are these differences uniform across sectors or are they driven by even larger TFP differences in specific sectors? Some forty years ago, Balassa and Samuelson hypothesized that the biggest TFP differences are in the...

This paper analyzes the asymptotic convergence properties of policy iteration in a class of stationary, infinite-horizon Markovian decision problems that arise in optimal growth theory. These problems have continuous state and control variables, and must therefore be discretized in order to...

A large empirical literature investigates the link between "openness" and growth. Cross-country observations suggest that (i) "openness" enhances growth by increasing a country's rate of investment, and (ii) variables related to equipment investment are robustly and strongly correlated with...

This paper uses a nonlinear stochastic model to describe inflation-unemployment dynamics in the U.S. after World War II. The model is a vector autoregression with coefficients that are random walks with innovations that are arbitrarily correlated with each other and with innovations to the...

We study infinitely repeated games with observable actions, where players have present-biased (so-called (beta)-(delta)) preferences. We give a two-step procedure to characterize Strotz-Pollak equilibrium payoffs: compute the continuation payoff set using recursive techniques, and use this set...

Many observers were surprised by the depreciation of the euro after its launch in 1999. Handicapped by a short sample, explanations tended to appeal to anecdotes and lessons learned from the experiences of other currencies. Now sample sizes are just becoming large enough to permit reasonable...

A number of recent papers have investigated the growth effects of tax reforms in the context of neoclassical growth models where growth is due to human capital accumulation. Stokey and Rebelo (1995) show that the predicted growth effects disagree to a striking extent and are highly sensitive to...

This paper analyzes the effect of market power in a model with dynamic and biological externalities. When several countries harvest fish in international waters the evolution of fish population is affected by their joint action, thus, generating a biological and a dynamic externality. If there...