We extend the basic Schumpeterian endogenous growth model by allowing incumbents to undertake innovations to improve their products, while entrants engage in more radical innovations to replace incumbents. Our model provides a tractable framework for the analysis of growth driven by both entry...

We study the optimal hiring and firing decisions of a firm under two different firing costs regulations: 1) Dual labor markets characterized by high firing costs for workers workers". 2) The Single Labor Contract, a policy proposal to make firing costs increasing in seniority at the job. We...

The Most-Favored Nation (MFN) clause has long been suspected of creating a free rider problem in multilateral trade negotiations. To address this issue, we model multilateral negotiations as a mechanism design problem with voluntary participation. We show that an optimal mechanism induces only...

The aim of this paper is to establish the link between the high frequency dynamics of spot exchange rates and developments in the macroeconomy. To do so, I first present a theoretical model of exchange-rate determination that bridges the gap between existing microstructure and traditional...

This paper studies the dynamics of the U.S. external position for the past 35 years, and examines alternative paths for future external adjustment. We develop a new present value expression for the external position that embeds the restrictions of international solvency and can be easily...

This paper studies the effects of financial integration on macroeconomic volatility and welfare. We examine a two-sector (tradable and nontradable), twocountry world economy with production in which both stocks and bonds are traded internationally, but markets are incomplete. The effects of...

This paper addresses international financial integration in a new way. We focus on informational integration, specifically, the importance of information conveyed by order flow in major currencies for pricing minor currencies. We develop a multi-currency model of portfolio allocation in the...

I develop and estimate a general equilibrium model for the term structures of nominal and real interest rates in the UK that incorporates Markov-switching. The model allows for non-neutralities, nonlinear dynamics, and flexibility in the dynamics of the risk premia - features that are all...

The paper studies the design of inter-governmental transfers when redistribution is effected through the public provision of a private good (education) by local government agents. The central government does not necessarily have the same preferences as the local agents regarding the relative...

The Most-Favored Nation (MFN) clause has long been suspected of creating a free rider problem in multilateral trade negotiations. To address this issue, we model multilateral negotiations as a mechanism design problem with voluntary participation. We show that an optimal mechanism induces only...