Several recent studies highlight the potential bias that may arise in measuring real wage cyclicality. This paper points to the important role of monetary policy in determining the latter. Using a simple model that diverts its focus from relative nominal price and wage rigidities, we show that...

Empirical modelling of the international linkages between the Euro Area and the US requires an open economy specification. This paper proposes and implements a structural VECM framework which imposes long run and short run cross-economy restrictions based on theoretically motivated restrictions...

The optimal discretionary policy rule in the New Keynesian forwardlooking model under the hypothesis of rational expectations responds only to fundamental shocks. This leads to indeterminacy of equilibria and E-unstability of the MSV REE. The outcome can be improved by responding to private...

This paper studies the optimal taxation structure and public maintenance spending in an endogenous growth model where public maintenance spending effects the efficiency of public and private capital. Private firms also spend on maintenance, which increases the effieicieny of private capital and...

This paper examines the growth effects of government expenditure for a panel of thirty developing countries over the decades of the 1970s and 1980s, with a particular focus on sectoral expenditures. Our methodology improves on previous research on this topic by explicitly recognising the role of...

This paper investigates the nature of nonlinearities in the term structure using the flexible approach to nonlinear inference. The paper reports clear evidence of nonlinearity, in contrast to the affine term structure model and consistent with recent claims in the literature. We find that there...

This paper provides evidence on the causes of movements in monthly UK stock prices, examining the role of macroeconomic and financial variables in a nonlinear framework. We allow for time-varying effects through the use of smooth transition models. We find that past changes in the dividend yield...

Existing theoretical analyses have shown that if policy variables affect investmentdecisions in either physical or human capital then an increase in policy variability results in higher trend output growth as individuals respond to higher uncertainty with a precautionary increase in these types...