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...

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...

FOMC meeting days provide a natural laboratory for exploring the effects of policy uncertainty and learning on exchange rate determination. Intradaily mark/dollar exchange rates are employed for 10 FOMC meetings. The meetings examined are the first 10 following the February 1994 change in policy...

The amount of wealth allocated to a particular risky asset depends on the riskiness of the asset. When an insurance policy against losses from holding the asset is made available, then this allocation can also depend on the form and the price of the insurance. The purpose of this research is to...

We examine bequest-sharing rules where wasteful competition for bequests is possible by children. We show that equal division minimizes rent-seeking expenditures by siblings. Finally, we employ a theory of rational social norms in order to discuss the evolution of bequest norms in the Middle...

This note reestimates Grossman and Krueger’s (1993) SO2 emissions regression including regressors to capture the effects of scale, trade and trade policy. Several new results are obtained. Increases in economic activity have a negative effect on the environment separate from changes in per...

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...