We use a two-sector neoclassical open economy model with traded and non-traded goods to investigate both the aggregate and the sectoral effects of temporary fiscal shocks. One central finding is that both sectoral capital intensities and labor supply elasticity matter in determining the response...

We use a neoclassical open economy model with traded and non traded goods to investigate the sectoral effects of three tax reforms: i) two revenue-neutral shifting the tax burden from labor to consumption taxes and ii) one labor tax restructuring keeping the marginal tax wedge constant....

We use a two-sector neoclassical open economy model with traded and non-traded goods to investigate both the aggregate and the sectoral e®ects of temporary ¯scal shocks. One central ¯nding is that both sectoral capital intensities and labor supply elasticity matter in determining the response...

This paper investigates the relative price and relative wage effects of a higher productivity in the traded sector compared with the non traded sector in a two-sector open economy model with imperfect substitutability in hours worked across sectors. The Balassa- Samuelson [1964] model predicts...

We use a two-sector neoclassical open economy model with traded and non-traded goods and endogenous markups to investigate both the aggregate and the sectoral ef- fects of temporary fiscal shocks. One central finding is that both the sectoral capital intensities and endogenous markups matter in...

This paper investigates the relative price and relative wage effects of a higher productivity in the traded sector compared with the non traded sector in a two-sector open economy model with imperfect substitutability in hours worked across sectors. The Balassa- Samuelson model predicts that a...

The ‘ratchet effect’ refers to a situation where a principal uses private information that is revealed by an agent’s early actions to the agent’s later disadvantage, in a context where binding multi-period contracts are not enforceable. In a simple, context-rich environment, we...

This contribution shows that the duration of a fisscal shock together with sectoral capital intensity matter in determining the dynamic and steady-state effects in an intertemporal-optimizing two-sector small open economy model. First, unlike a permanent shock, net foreign asset position always...

We use a two-sector neoclassical open economy model with traded and non-traded goods to investigate the effects of unanticipated and anticipated tax reforms. First, an unanticipated tax reform produces an expansion of GDP, labor, and investment, while an anticipated tax reform has opposite...