We estimate an aggregate production function with constant elasticity of substitution between energy and a capital/labor composite using U.S. data. The implied measure of energy-saving technical change appears to respond strongly to the oil-price shocks in the 1970s and has a negative medium-run...

This paper develops a model that integrates the climate and the global economy---an integrated assessment model---with which different policy scenarios can be analyzed and compared. The model is a dynamic stochastic general-equilibrium setup with a continuum of regions. Thus, it is a full...

We analyze a dynamic stochastic general-equilibrium (DSGE) model with an externality through climate change from using fossil energy. A central result of our paper is an analytical derivation of a simple formula for the marginal externality damage of emissions. This formula, which holds under...

Can a country gain international competitiveness by the design of optimal monetary stabilization rules? This paper reconsiders this question by specifying an open-economy monetary model encompassing a 'production relocation externality,' developed in trade theory to analyze the benefits from...

This paper investigates the international transmission of productivity shocks in a sample of five G7 countries. For each country, using long-run restrictions, we identify shocks that increase permanently domestic labor productivity in manufacturing (our measure of tradables) relative to an...

This paper provides a baseline general-equilibrium model of optimal monetary policy among interdependent economies, with monopolistic firms that set prices one period in advance. Strict adherence to inward-looking policy objectives such as the stabilization of domestic output cannot be optimal...

We analyze the policy trade-offs generated by local currency price stability of imports in economies where upstream producers strategically interact with downstream firms selling the final goods to consumers. We study the effects of staggered price setting at the downstream level on the optimal...

This paper analyzes optimal spending, tax and financial policies in models of endogenous growth where public spending is productive. We extend previous work in four directions. First, we analyze optimal policies when the government is allowed to borrow and lend, rather than being restricted to...

It is often argued that the provision of liquidity by the international institutions such as the IMF to countries experiencing balance of payment problems can have catalytic effects on the behavior of international financial markets, i.e., it can reduce the scale of liquidity runs by inducing...

This paper develops an interpretation of the Asian meltdown focused on moral hazard as the common source of overinvestment, excessive external borrowing, and current account deficits. To the extent that foreign creditors are willing to lend to domestic agents against future bail-out revenue from...