It is frequently alleged that the persistent, high rates of unemployment in many European countries are due, at least in part, to various labor market rigidities. One of these rigidities is the high cost of firing workers, compared with the cost in the United States, or in Europe in the early...

This paper articulates a model of the small, open economy in which the stock market, rather than the bond market, determines domestic aggregate demand. It resembles in many respects the widely adopted dynamic Mundell-Fleming approach, but can, in some circumstances, exhibit output and asset...

In conventional models of the open economy, the impact on the trade balance of a change in the terms of trade depends upon whether the Marshall-Lerner condition on demand elasticities is satisfied. This paper shows that, in a model which incorporates rational savings behavior, the link between...