Our model is a variant of the cash-in-advance model. Goods must be purchased in the seller’s currency, but currency may be traded before shopping at a cost. This cost is a measure of substitutability. The model is applied to seignorage taxation. We show that optimal money growth is positive...

This paper examines alternative ways to prevent losses from bank insolvencies. It is widely viewed that transparency in reporting bank balance sheets is a key element in reducing such losses. It is, however, unclear just how such transparency would be achieved. Current approaches to avoiding...

This paper develops a dynamic computable general equilibrium model in which optimizing agents evade taxes by operating in the underground economy. The cost to firms of evading taxes is that they find themselves subject to credit rationing from banks. Our model simulations show that in the...

This paper constructs an intertemporal general equilibrium model designed to examine an economy in transition from central planning to being market oriented. A numerical algorithm is developed to obtain a solution for the model. Simulations using stylized country-specific data examine the...

This work employs a dynamic general equilibrium model to evaluate the causes and implications of bank insolvencies. The model is applied to stylized data from several South Asian countries. It derives conclusions about policy instruments designed to alleviate the impact of insolvencies. Firms...

This paper reviews briefly the controversy in the literature concerning the speed of adjustment and sequencing of reforms, and presents a model parameterized with Chinese data. The model is used to generate different policy simulations to illustrate some of the key issues in the debate on the...

This paper analyzes certain policies that are typical of a number of rapidly growing East Asian countries in which a fixed exchange rate, combined with a surplus labor market, has made domestic assets relatively inexpensive, generating high rates of FDI as well as domestic capital formation....

One objective of government investment is to develop public infrastructure which may reduce private sector costs. In a developing economy, the scope for payoffs to investments of this sort may be particularly large. A major concern related to the recent fiscal adjustment in Mexico is that it has...