This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific...

This paper analyses the impact of government tax and subsidy policy on immigration of human capital and the effect of such immigration on growth and incomes. In the context of a two-country endogenous growth model with heterogeneous agents and human capital accumulation, we argue that human...

The optimal provision of loan guarantees or deposit insurance is examined in the context of an overlapping generations model. It is demonstrated that even in the face of a market imperfection that precludes diversification of the private sector’s loan portfolio to eliminate risk, full...

This paper examines the possibility of ascertaining the welfare changes that occur when a consumption tax replaces an equal-yield income tax. It finds that those with saving/income ratios greater than the social saving/income ratio under the income tax will surely benefit and those with ratios...

This paper analyzes, in a public finance context, how the optimal use of the inflation and the consumption tax is affected by incorporating into the model constraints on policy decisions that are likely to develop in the context of the EMS by 1992. Two main questions are addressed: first, how...

This paper presents a neoclassical model that explains the observed empirical relationship between government spending and world commodity supplies and the real exchange rate and real commodity prices. It is shown that fiscal expansion and increasing world commodity supplies simultaneously lead...

In an economy with a debt overhang, investment depends on expected tax rates. On the other hand, expected tax rates depend on the debt’s face value. Therefore investment depends on the face value of debt. I show that this may lead to a positive or negative association between debt and...

This paper provides empirical evidence on the determinants of long-term growth performance in a sample of 55 developing countries grouped by income levels. The evidence indicates that a model incorporating the savings rate, export performance, expenditures on human capital development, the...

We explore the role of business services in knowledge accumulation and growth and the determinants of knowledge diffusion including the role of distance. A continuous-time model is estimated on several European countries, Japan, and the United States. Policy simulations illustrate the benefits...

This Selected Issues paper analyzes sustaining potential growth in Aruba. As in the other Caribbean countries, there are growing concerns in Aruba about the slowdown in economic growth over the past two decades and the consequent tepid outlook for potential growth. Tackling such concerns...