In this paper we study these features using a game-theoretical model with coordination problems and repeated renegotiations. The key difference between 1980s and 1990s is the existence of secondary markets for bonds in 1990s. The markets play two roles. First, the liquidity of bonds lowers the...

asset income tax in this system is zero.

The goal of the paper is to understand causes and consequences of corruption. To that end we estimate a dynamic model of decisions by politicians. We consider a model with the following features. First, individuals in the economy have preferences over a private good and a public good. Second,...

A model characterizes the optimal r&d policy in a setting where innovations lead to an increase in profits and the probability of innovation increases with the knowledge stock. Simulated method of moments estimation identifies the structural parameters using data on profits, firm values and r&d...

Industrial production is both highly variable and correlated across sectors. This correlation arises in part from common or aggregate shocks and from sector-specific shocks that propagate across sectors via input-output linkages or other complementarities in production. Using factor analytic...

This paper studies optimal taxation in a class of economies in which agents have dispersed private information regarding aggregate shocks (commonly-relevant fundamentals such as aggregate productivity and demand conditions). The dispersion of information opens the door to inefficiencies that...

3.Finally we consider the case where the government's information is even more limited, as not only the linear taxes on trades but also the lump-sum tax cannot depend on the ex-post realization of the individual income shocks. In this case the second best cannot typically be attained, but we...

In this paper, we use data from developing countries to argue that sovereign defaults are often caused by fiscal pressures generated by large-scale domestic defaults. We argue that these systemic domestic defaults are caused by shocks best interpreted as being non-fundamental. We construct a...

This paper implements a structural model of the yield curve with data on nominal positions and survey forecasts. Bond prices are characterized in terms of investors' current portfolio holdings as well as their subjective beliefs about future bond payoffs. Risk premia measured by an...

empirical studies.