How will international integration affect welfare policies? This paper considers the possibilities of financing public sector activities (public consumption and social security expenses) by general (wage) taxation in an economy which becomes more integrated in international product markets. Even...

Empirical evidence documents substantial persistence in the adjustment process to nominal shocks. Existing open-economy models have failed either to generate interesting dynamics or found that the mechanisms are quantitatively weak. We consider the propagation of nominal shocks in a fully...