Optimal tax and monetary policies in a stochastic monetary growth model are investigated. Our findings are of three general types. First, both capital income taxes and monetary growth are shown to influence the economy through effective risk-adjusted measures, expressed as a linear function of...

A dynamic dependent-economy model is developed to investigate the role of the real exchange rate in determining the effects of foreign aid. If capital is perfectly mobile between sectors, untied aid has no longrun impact on the real exchange rate. A decline in the traded sector occurs because...