This paper studies the impact of real effective exchange rate volatility on economic growth as well as the euro’s impact on real effective exchange rate volatility. We first show that after a plausible endogeneity correction, real effective exchange rate volatility is negatively associated...

In standard public finance theory a government's cost of borrowing depends on the common beliefs held by rational investors regarding default risk. We advance understanding of the effects of diverse beliefs and overconfidence among investors in their ability to assess the sovereign's...

This paper studies the political economy of fertility. Specifically, I argue that fertility may be a strategic choice for ethnic groups engaged in redistributive conflict. I first present a simple conflict model where high fertility is optimal for each ethnic group if and only if the...

Based on evidence linking natural resources to civil conflict, this paper studies two armed groups fighting to control a resource and possibly a second prize. Labor is used in the agricultural, resource extraction and conflict sectors, and the groups also buy a capital input to conflict subject...

This paper relates democracy, public and private international capital flows, and odious debt. Democracy commits a ruler to pass borrowed funds on to the private sector which builds the country's international collateral, and the consequent rise in the credit ceiling is a Pareto-improvement...

In this note, we introduce two distinct incentive mechanisms that support dynamic intra-group cooperation in the context of prisoner's dilemma payoffs: rewards for cooperating, and punishments for defection, where the rewarding or punishing party may be outside the relationship.

The author applies the theory of the soft budget constraint to explain some stylized facts regarding the outcomes and practice of international aid, including ineffectiveness, white elephants, and volatility. The soft budget constraint can also make aid counterproductive. Nonetheless, actual aid...

Large populations can gain from economies of scale but lose internal trust due to diluted information. This creates an optimal group size. However, trusting strangers who claim to be members invites outsiders to disguise as insiders and abuse extended trust. Thus, if cultural diversity can raise...

Using non-linear methods, we argue that existing estimates of government spending multipliers in expansion and recession may yield biased results by ignoring whether government spending is increasing or decreasing. In the case of OECD countries, the problem originates in the fact that, contrary...