A balanced budget requirement does not only prevent fiscal policy makers from smoothing tax distortions but also affects their preferred choice of government spending. The paper analyzes the conditions under which groups opposed to government spending might want to implement a balanced budget...

This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency, a situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since it both makes more...

This note sheds new light on the dynamic properties of maintenance and repair and examines the behavior of an additional form of capital spending- that of improvements. The analysis examines a unique long-run data set on Swiss road spending.

The Czech banking system is seen by many observers to be the most successful of all former socialist economies’. But have Czech banks successfully provided worthy enterprises with sufficient credit from the funds made available to them? Using data from the Czech National Bank and data on...

The paper presents a general equilibrium currency crises model of the "third generation", in which the possibility of currency crises is driven by the interplay between private firms' credit-constraints and nominal price rigidities. Despite our emphasis on microfoundations, the model remains...

We argue that a higher share of the private sector in a country’s external debt raises the incentive to stabilize the exchange rate. We present a simple model in which exchange rate volatility does not affect agents’ welfare if all the debt is incurred by the government. Once we introduce...

While the direct impact of geographic endowments on prosperity is present in all countries, in former colonies, geography has also affected colonization policies and, therefore, institutional outcomes. Using non-colonized countries as a control group, I develop an empirical strategy that...

Starting with Krugman (1980), much literature has analyzed how trade liberalization affects the economy based on the notion that trade is motivated by consumer’s love of variety. In this paper, I augment these preferences by the determinants of demand for heterogeneous products. The model...