Through a comparative dynamic analysis, we argue that the reality of public debt issuance, which responds flexibly to business cycles in contrast to the EU’s institutionally prescribed fiscal discipline, may contribute to macroeconomic stabilization. Through a simple econometric analysis, we...

Since the channel for agents' expectations matters for the effectiveness of monetary policies, it is crucial for policy-makers to assess the degree to which economic agents are boundedly rational and understand how the bounded rationality affects the monetary rules in stabilising the economy. We...

This paper constructs an open-economy factor-augmented VAR model to assess the dynamic effects of global shocks on emerging economies and quantify their importance in explaining macroeconomic fluctuations in emerging markets. An unexpected favorable shock to global demand and supply has a strong...

We estimate a novel state-space model to jointly identify international technology trend shocks originating in the US economy as well as shocks that are specific to the UK economy. We further differentiate between technological innovations arising from changes in total factor productivity (TFP)...

This paper contrasts the effects of a permanent and temporary investment tax credit in an open economy. In both cases an ITC will initially stimulate investment, while reducing employment and output, and generating a current account deficit. If the ITC is permanent, the accumulation of capital...

We use a standard new Keynesian model to evaluate the disinflation cost in a small open economy vis-à-vis a closed economy. Three measures of the cost are evaluated: the sacrifice ratio, the central bank’s loss, and the welfare of the representative agent. We show that in the small open...