Identifying determinants of the output-inflation tradeoff has long been a key issue in business cycle research. We provide evidence that in countries with greater restrictions on capital mobility, a given reduction in the inflation rate is associated with a smaller loss in output. This result is...

Even though financial markets today show a high degree of integration, the world capital market is still far from the textbook story of high capital mobility. The purpose of this paper is to highlight key sources of market failure in the context of international capital flows and to provide...

A number of developing countries have run large and persistent current account deficits in both the late seventies/early eighties and in the early nineties, raising the issue of whether these persistent imbalances are sustainable. This paper puts forward a notion of current account...

This paper highlights key macroeconomic issues related to VAT harmonization. A model is developed which emphasizes the effects of changes in the time profile of various taxes on international behavior. Dynamic simulations reveal that the macroeconomic and welfare implications of VAT...

This paper studies the fiscal restructuring of the first half of the 1990s in the major industrial countries. It presents and calibrates a simple model of the labor market and integrates it into a multi-country macroeconomic model that takes into account the effects of distortionary taxes. It...

Data for the United States and countries in Western Europe indicate a negative correlation between the dependency ratio and both labor tax rates and the generosity of social transfers, after controlling for other factors that influence the size of the welfare state. This is despite the increased...

Migrants, being relatively low earners, are net beneficiaries of the welfare state. However, this paper uses a dynamic model to show that because of migrants’ positive influence on the pension system, which is an important pillar of any welfare state, migration could be beneficial to all...

The extent of taxation and redistribution policy is generally determined at a political-economy equilibrium by a balance between those who gain and those who lose from a more extensive tax-transfer policy. In a stylized model of migration and human capital formation, we find, somewhat against...

The paper studies determinants and consequences of sharp reductions in current account imbalances (reversals) in low- and middle-income countries. It poses two questions: what triggers reversals, and what factors explain how costly reversals are? It finds that both domestic variables, such as...

This paper distinguishes between debt and equity flows in the presence of information asymmetry between the firm’s “insiders” and “outsiders” in a small open economy. It shows the inadequacy of capital investment because its scope is too narrow and the investment each firm makes is too...