We use a two-sector neoclassical open economy model with traded and non-traded goods to investigate both the aggregate and the sectoral e®ects of temporary ¯scal shocks. One central ¯nding is that both sectoral capital intensities and labor supply elasticity matter in determining the response...

We use a two-sector neoclassical open economy model with traded and non-traded goods to investigate the effects of unanticipated and anticipated tax reforms. First, an unanticipated tax reform produces an expansion of GDP, labor, and investment, while an anticipated tax reform has opposite...

This paper investigates the relative price and relative wage effects of a higher productivity in the traded sector compared with the non traded sector in a two-sector open economy model with imperfect substitutability in hours worked across sectors. The Balassa- Samuelson [1964] model predicts...

We use a two-sector neoclassical open economy model with traded and non-traded goods and endogenous markups to investigate both the aggregate and the sectoral ef- fects of temporary fiscal shocks. One central finding is that both the sectoral capital intensities and endogenous markups matter in...

This paper investigates the relative price and relative wage effects of a higher productivity in the traded sector compared with the non traded sector in a two-sector open economy model with imperfect substitutability in hours worked across sectors. The Balassa- Samuelson model predicts that a...

The ‘ratchet effect’ refers to a situation where a principal uses private information that is revealed by an agent’s early actions to the agent’s later disadvantage, in a context where binding multi-period contracts are not enforceable. In a simple, context-rich environment, we...

We use a two-sector neoclassical open economy model with traded and non-traded goods to investigate both the aggregate and the sectoral e®ects of temporary ¯scal shocks. One central ¯nding is that both sectoral capital intensities and labor supply elasticity matter in determining the response...

This paper investigates the relative price and relative wage effects of a higher productivity in the traded sector compared with the non traded sector in a two-sector open economy model with imperfect substitutability in hours worked across sectors. The Balassa-Samuelson [1964] model predicts...

This paper investigates both the dynamic and steady-state effects of unanticipated permanent and temporary terms of trade shocks within a two-good small open economy with habit formation and capital adjustment costs. A permanent terms of trade worsening induces a deficit-surplus current account...