This paper examines the role of external shocks in explaining macroeconomic fluctuations in African countries. We construct a quantitative, stochastic, dynamic, multi-sector equilibrium model of a small open economy calibrated to represent a typical African economy. In our framework, external...

Many recent theoretical papers have come under attack for modeling prices as Geometric Brownian Motion. This process can diverge over time, implying that firms facing this price process can earn infinite profits. We explore the significance of this attack and contrast investment under Geometric...

The analysis of the determinants of economic growth has allowed the development of extensive literature that has recognized the role of human capital as the main explanatory variable of countries' economic growth. However, the evidence indicates that this relationship does not always occur in a...

Standard two-country macroeconomic models predict that high interest-rate currencies depreciate over time, as arbitrage eliminates profitable carry trade strategies. Empirical studies find that those currencies instead tend to appreciate - this is the "uncovered interest rate parity puzzle."...

The choice of financing public expenditure with taxes or debt (or both) have been widely investigated by the literature, without finding an ultimate solution. In this article, we take a different point of view and compute the dynamics of the optimal debt/GDP ratio to study under which conditions...