We extend the deterministic growth model of <link rid="b1">Glomm and Ravikumar (1994)</link> to a stochastic endogenous growth model which nests both exogenous and endogenous growth factors. By introducing simple shocks to production technology, private capital and public capital investment, we can derive testable...

The typical New-Keynesian small-open-economy model has qualitative features and monetary-policy prescriptions similar to their original closed-economy counterparts - i.e. complete stablization of domestic inflation is sufficient for optimal policy. We consider a version of the model here where...

In this paper, we consider a dynamic New Keynesian model of the small open economy in the light of bounded rationality. This entails private agents and the central bank updating their beliefs about the laws of motion of inflation, the output gap and real exchange rate when forming their optimal...

We study an overlapping-generations model with private externalities on a public good (e.g. the environment). Emergent politico-economic equilibria, depending on model primitives (e.g. the degree of externality), imply that average income and environmental outcomes may be related positively or...

In this paper we study the endogenous choice to accept fiat objects as media of exchange, the fundamentals that drive their acceptance, and their implications for their bilateral nominal exchange rate. To this end, we consider a small open economy where agents have no restrictions on what...

This paper quantifies the costs of mitigating exchange rate volatility within the context of a flexible inflation targeting central bank. Within a standard linear-quadratic formulation of inflation targeting, we append a term that penalises deviations in the exchange rate to the central bank's...