This paper studies monetary and fiscal policy interactions in a two country model, where taxes on firms’ sales are optimally chosen and the monetary policy is set cooperatively. It turns out that in a two country setting non-cooperative fiscal policy makers have an incentive to change taxes on...

Mortgages characterized by negative or low early amortization schedules amplify the macroeconomic effects of a housing risk shock. We analyze the role of mortgage amortization in a two-sector DSGE model with housing risk and endogenous default. Mortgage loan contracts extend to two periods and...

This paper develops a DSGE model with housing, risky mortgages, and endogenous default. Housing investment is subject to idiosyncratic risk, and some mortgages are defaulted in equilibrium. An unanticipated increase in the standard deviation of housing investment risk produces a credit crunch...

This paper develops a DSGE model with housing, risky mortgages and endogenous default. Housing investment is subject to idiosyncratic risk and some mortgages are defaulted in equilibrium. An unanticipated increase in the standard deviation of housing investment produces a credit crunch where...

We study trade policy in a two-sector Krugman type model of trade. We conduct a general analysis allowing for three different instruments: tariffs, export taxes and production subsidies. For each instrument we consider unilateral trade policy without retaliation. When carefully disentangling the...

A two area dynamic stochastic general equilibrium model is employed to investigate the welfare implications of losing monetary independence. Two policy regimes are compared: (i) in one area there is a common currency, while in the other area countries still retain their autonomous monetary...

I develop and analyze a DSGE model of a currency union to revise the question of how to conduct monetary and fiscal policy in countries that share the same currency. In contrast with the previous literature which assumes coordination, this paper analyzes the case where coordination lacks among...

We study trade policy in a two-sector Krugman-type trade model with home market effects. We conduct a general analysis allowing for three different instruments: tariffs, export taxes and production subsidies. For each instrument, we consider unilateral trade policy without retaliation. When...

We study trade policy in a two-sector Krugman-type trade model with home market effects. We conduct a general analysis allowing for three different instruments: tariffs, export taxes and production subsidies. For each instrument, we consider unilateral trade policy without retaliation. When...