The arguments put forward by Bulow and Rogoff (1988, 1991) against sovereign debt buybacks are re-examined in a willingness-to-pay framework. This paper argues that the Bulow-Rogoff framework treats default by a debtor as an event with no dead-weight loss, and, as such, underestimates the...

This paper considers a two-period optimal contracting model in which firms make new hires in the second period subject to the constraint that they cannot pay discriminate either against or in favour of the new hires. Under an assumption on the information available to workers, it is shown that...

This paper introduces staggered wage contracts a la Taylor (1979)into a standard model of monetary policy credibility. The overlapping wage structure is shown to considerably exacerbate the time consistent inflation rate in Markov perfect equilibrium. If the central bank can commit to its...

Following insights by Bewley (1999a), this paper analyses a model with downward rigidities in which firms cannot pay discriminate based on a year of entry to a firm, and develops an equilibrium model of wages and unemployment. We solve for the dynamics of wages and unemployment under conditions...

In this paper we conduct a theoretical analysis of the implications of a union which can exploit the existence of firm labour adjustment costs. We consider a model involving a large number of identical firms facing a single, economy-wide union. We solve (i) for the Markov perfect equilibria with...