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The Welfare Gains from Macro-Insurance Against Natural Disasters

Borensztein, Eduardo - 2015

This paper uses a dynamic optimization model to estimate the welfare gains that a small open economy can derive from insuring against natural disasters with catastrophe (CAT) bonds. We calibrate the model by reference to the risk of earthquakes, floods and storms in developing countries. We find...

Persistent link: https://www.econbiz.de/10013013167

Financial Choice in a Non-Ricardian Model of Trade

Russ, Katheryn Niles - 2009

We join the new trade theory with a model of choice between bank and bond financing to show the differential effects of … small open economy. Increasing bank efficiency and reducing bond transaction costs both increase welfare but have opposite … openness increases firms' relative demand for bond versus bank financing. We identify a financial switching channel for gains …

Persistent link: https://www.econbiz.de/10013153982

Managing Catastrophic Risk

Kunreuther, Howard - 2012

A principal reason that losses from catastrophic risks have been increasing over time is that more individuals and firms are locating in harm's way while not taking appropriate protective measures. Several behavioural biases lead decision-makers not to invest in adaptation measures until after...

Persistent link: https://www.econbiz.de/10013104996

Green Tax Reform and Competitiveness

Koskela, Erkki; Schöb, Ronnie; Sinn, Hans-Werner - 2021

This paper develops a model of a small open economy that produces an export good with domestic labour and imported energy and is stuck in an unemployment situation resulting from an excessive fixed net-of-tax wage rate. We study a revenue-neutral green tax reform that substitutes energy for wage...

Persistent link: https://www.econbiz.de/10013225566

Growth and Welfare in a Small Open Economy

Grossman, Gene M. - 2010

We construct a model of growth based on endogenous technological change in a small, open economy. Entrepreneurs develop new intermediate products whenever the present value of potential profits exceeds the cost of R&D. Diversity of intermediates contributes to total factor productivity in the...

Persistent link: https://www.econbiz.de/10013139328

Capital Account Policies and the Real Exchange Rate

Jeanne, Olivier - 2012

This paper presents a simple model of how a small open economy can undervalue its real exchange rate using its capital account policies. The paper presents several properties of such policies, and proposes a rule of thumb to assess their welfare cost. The model is applied to an analysis of...

Persistent link: https://www.econbiz.de/10013100363

Pegs, Downward Wage Rigidity, and Unemployment : The Role of Financial Structure

Schmitt-Grohé, Stephanie - 2012

This paper studies the relationship between financial structure and the welfare consequences of fixed exchange rate regimes in small open emerging economies with downward nominal wage rigidity. The paper presents two surprising results. First, a pegging economy might be better off with a closed...

Persistent link: https://www.econbiz.de/10013103809

Trade, Diffusion and the Gains from Openness

Rodríguez-Clare, Andrés - 2012

Building on Eaton and Kortum's (2002) model of Ricardian trade, Alvarez and Lucas (2005) calculate that a small country representing 1% of the world's GDP experiences a gain of 41% as it goes from autarky to frictionless trade with the rest of the world. But the gains from openness, which...

Persistent link: https://www.econbiz.de/10012755278

Revisiting the Commodity Curse : A Financial Perspective

Alberola, Enrique - 2017

We study the response of a three-sector commodity-exporter small open economy to a commodity price boom. When the economy has access to international borrowing and lending, a temporary commodity price boom brings about the standard wealth effect that stimulates demand and has long-run...

Persistent link: https://www.econbiz.de/10012962189

Understanding the Gains from Wage Flexibility : The Exchange Rate Connection

Galí, Jordi; Monacelli, Tommaso - 2021

We study the gains from increased wage flexibility using a small open economy model with staggered price and wage setting. Two results stand out: (i) the effectiveness of labor cost reductions as a means to stimulate employment is much smaller in a currency union, (ii) an increase in wage...

Persistent link: https://www.econbiz.de/10013311616