We revisit the question of why exchange-rate-based (ERB) disinflation is often expansionary. We use an analytical DGE model in discrete time with staggered wages. If the policy is unanticipated, and if the currency is pegged at the level it would have reached under unchanged policies, then a...

type="main" <p>A model where a dictator decides on both the level of public-sector capital and whether to democratize is constructed. Under dictatorship the labour market is monopsonistic; democratization involves instituting a competitive labour market. Workers sometimes have a credible threat of...</p>

We develop a two-period model where a risk-averse entrepreneur decides on the size of an investment project and how to finance it. He can use debt and/or equity finance; an incentive compatibility constraint limits the extent to which the project can be financed with equity. With debt, he may, in...

This paper studies the effects of tariffs in a two-period, two-good, macroeconomic model. The first period is characterized by unemployment and either nominal or real wage rigidities. In the second period, all prices are flexible and markets clear. Consumer behavior is based on intertemporal...

An open macroeconomic model where wages and employment are determinedby bargaining between a representative firm and a representative union is developed. The model is characterized by a number of regimes; in each of these regimes the effects of changes in the termsof trade and in government...

In this paper, a two-period macroeconomic model, in which output is demand determined, is constructed. In the first period firms may borrow to finance investment, which reduces their marginal costs in the second period; however, since default by borrowers is possible there is an incentive...