A new and extensive panel of outward foreign direct investment (FDI) at the sector level is used to estimate the determinants of non-resource and resource FDI. Since FDI is I(1), we estimate panel error-correction models of FDI with spatial lags for FDI and market potential. Our main result is...

The response of an economy to a windfall of foreign exchange (be it aid or natural resource revenues) is often constrained by absorptive capacity. We provide a micro-founded analysis of absorption constraints, based on the idea that expanding the economy’s capital stock (in aggregate or...

Optimal climate policy is studied in a Ramsey growth model. A developing economy weighs global warming less, hence is more likely to exhaust fossil fuel and exacerbate global warming. The optimal carbon tax is higher for a developed economy. We analyze the optimal time of transition from fossil...

Risk-adjusted LQG optimal control with perfect and imperfect observation of the economy is used to obtain prudent Taylor rules for monetary policies and cautious Kalman filters. A prudent central bank adjusts the nominal interest rate more aggressively to changes in the inflation gap, especially...

Although there are exceptions, most European universities and institutions of higher education find it difficult to compete with the best universities in the Anglo-Saxon world. Despite the Bologna agreement and the ambitions of the Lisbon agenda, European universities are in need of fundamental...

If private goods are perfect substitutes for public goods and environmental quality, greener preferences reduce employment, raise abatement, and improve environmental quality. If the elasticity of substitution between private goods and leisure exceeds one, the tax rate increases, thereby...

The authors extend macroeconomic models of imperfect competition with Keynesian features to allow for nonunitary elasticities between leisure and consumption and the effect of product variety on multipliers and welfare. Provided preference for diversity is sufficiently strong, the real national...

The authors examine the effects of removing tariffs and trade barriers on the behavior of utilitarian trade unio ns using a two-country macroeconomic model. A "hump-shaped" relationshi p between wages and the degree of corporatism emerges here, analogousl y with closed-economy models. The...

The authors document an empirical puzzle for European Monetary System exchange rates during a period in which the bands on these exchanges rates were (almost) credible, i.e., exchange rate distributions are hump-shaped rather than U-shaped as predicted by the standard target zone model. The...