We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers...

A key priority for the Gulf Cooperation Council (GCC) countries is to create a dynamic non-oil tradable sector to support sustainable growth. Since export diversification takes a long time, it has to start now. We argue that the failure to diversify away from oil stems mainly from market...

Policymakers in oil-exporting countries confront the question of how to allocate oil revenues among consumption, saving, and investment in the face of high income volatility. We study this allocation problem in a precautionary saving and investment model under uncertainty. Consistent with data...

The more a country saves, the less it invests as a share of saving. We build a “store-or-sow” model of growth with precautionary saving and investment to study the nonlinear relationship between investment and saving. We contend that income volatility is an important variable for explaining...

Policymakers in oil-exporting countries confront the question of how to allocate oil revenues among consumption, saving, and investment in the face of high income volatility. We study this allocation problem in a precautionary saving and investment model under uncertainty. Consistent with data...

We study how macroeconomic shocks affect U.S. public debt dynamics using a VAR with debt feedback. Following a fiscal austerity shock, the debt ratio initially declines and then returns to its pre-shock path. Yet, the effect is not statistically significant. In a weak economic environment, the...

Abstract: The economies of the six Gulf Cooperation Council (GCC) countries are heavily reliant on oil. Greater economic diversification would reduce their exposure to volatility and uncertainty in the global oil market, help create jobs in the private sector, increase productivity and...

There are almost 200,000 enterprises operating in the Finnish service sector, combined. However, not all of the service industries are the same. Some services have become independent of geographical locations, meaning that they can be exported, much like physical products. Other services still...

Microsoft’s acquisition of Nokia’s phone business has considerable implications for Nokia and potentially for Finland as a country, but little immediate effects on Microsoft and related industries. One might ask, couldn’t there have been better remedies for the challenges both Microsoft...