Models with externalities have become increasingly popular for studying both long-term growth and business cycle fluctuations. Externalities can lead to indeterminacy, allowing self-fulfilling expectations to determine the equilibrium. This paper argues that the importance of indeterminacy might...

We study monetary policy under different central bank constitutions when the labor-market insiders set the nominal wage so that outsiders are involuntarily unemployed. If the insiders are in the majority, the representative insider will be the median voter. We show that an independent central...

How does trade policy a affect technology adoption, total factor productivity (TFP henceforth), and per capita income? To study this question we construct a dynamic general equilibrium model of a small open economy in which a coalition of skilled workers chooses the technology. We obtain three...

Models with externalities have become increasingly popular for studying both long-term growth and business-cycle fluctuations. Externalities can lead to indeterminacy, allowing self-fulfilling expectations to determine the equilibrium. This paper argues that the importance of indeterminacy might...

The authors show that delegation of monetary policy to a weight-conservative central banker can be desirable, although the government can also use an inflation contract, an employment target, an inflation target, or any combination of these to control the central banker. The key feature of the...

It is well known that if there are mild sector-specific externalities, then the steady state of the standard two-sector real business cycle model can become locally indeterminate and endogenous business cycles can arise. We show that this result is not robust to the introduction of standard...

Using the citizen--candidate model we study the government"s choice of institutions for the labour market and the central bank and derive the implications for inflation and employment. We derive conditions for the existence of equilibria in which the labour market is distorted and the central...

Standard growth accounting exercises find large cross-country differences in aggregate TFP. Here we ask whether specific sectors are driving these differences, and, if this is the case, which these problem sectors are. We argue that to answer these questions we need to consider four sectors. In...