We rely on a simple game theoretic structure to provide rationale for the apparent synchronization of foreign investment crises. Specifically, we outline a very basic and very intuitive mechanism that allows a crisis in a given economy to spread to other economies. Furthermore, we obtain our...

We show using elementary arguments that the utilitarian approach to optimal taxation leads to results that are very sensitive to the underlying formulation of the problem. In particular, we argue that there are legitimate optimal taxation problems that admit solutions of a different form than...

The optimal labor income taxation problem is cast in the context of the Polish economy. We use the actual Polish data on labor income and the corresponding tax revenue provided by the Polish Tax Authority to calibrate the optimal taxation Problem of Mirrlees to the Polish data. We solve the...

We prove in the context of optimal taxation that the utility possibility frontier can be reached with step functions. This opens a possibility of existence of legitimate - with suitably chosen marginal social welfare weights - optimal taxation problems that admit solutions of a different form...

In the paper we show – using standard approaches, general equilibrium modeling and the assumption of complete rationality – that macroeconomic environment is endogenous and is indeterminate. Specifically, it is argued – without resorting to sunspot type arguments – that microeconomic...

The paper recognizes that expectations and the process of their formation are subject to standard decision making and are determined as a part of equilibrium. Accordingly, the paper presents a basic framework in which the form of expectation formation is a choice variable. At any point in time...

The paper focuses on short run macroeconomic dynamics triggered by demand side shocks. In particular, the paper analyzes, in a general equilibrium framework, the impact of transitory demand side shocks on the behavior of macroeconomic variables and examines the relevance of policy instruments...

We focus exclusively on preferences characterized by the absence of income effects. We argue that the approach of Mirrlees to optimal taxation is faulty as it fails to identify the true optimum of the optimal taxation problem. Furthermore, we argue that zero optimal marginal tax rates are...

In this paper we present solutions to the optimal taxation problem in Poland in the case of high income earners. We characterize the actual data provided by the Polish Tax Authority and show that it is thick-tailed in the upper end of the distribution. Specifically, we show that income...

We revisit the issue of optimality of public debt in a general equilibrium framework. Specifically, we endow the government with the power to set the interest rate on bonds it issues and by doing so we move beyond the set of competitive equilibria and extend the domain of the standard Ramsey...