This paper examines the implications of terms of trade vulnerability for a perfectly competitive, small open economy with incomplete risk markets. Conditions are obtained for which an improvement in the mean terms of trade raises welfare and for which an increase in the variance of the terms of...

We construct a dynamic error correction model of the Australian labor market using a macroeconomic panel across seven states from 1972:3 to 1999:1. Medium-run equilibrium estimates support a real wage-productivity gap and an unemployment gap. The dynamic short-run estimates support...

Using a model of intertemporally optimizing households, this paper establishes that fiscal policy needs to be endogenous to preempt instability if one wishes to permit any combination of money and debt finance. Conservative governments enforce a greater margin of preemption than liberal...