This paper studies an international tax policy design problem by employing a two-country dynamic general equilibrium model with incomplete asset markets. We investigate the possibility of welfareimproving active tax policies, in particular capital and labor income tax, under the non-cooperative...

A dynamic stochastic general-equilibrium (DSGE) model with real and nominal, both price and wage, rigidities succeeds in capturing some key nominal features of U.S. business cycles. Additive technology shocks, as well as multiplicative shocks, are introduced and shown to be crucial. Monetary...

Two types of adjustment cost specifications coexist in macroeconomic models with investment: intertemporal adjustment costs which involve a nonlinear substitution between capital and investment in capital accumulation, and multisectoral costs which are captured by a nonlinear transformation...

Papers on international business cycles have documented spurious welfare reversals: incomplete markets produce a higher level of welfare than the complete market. This paper first demonstrates how conventional linearization, as used in King, Plosser, and Rebelo (1988), can generate approximation...

The ongoing demographic changes will bring about a substantial shift in the size and theage composition of the population, which will have significant impact on the global economy. Despite potentially grave consequences, demographic changes usually do not take center stage in many macroeconomic...

We describe an algorithm for calculating second order approximations to the solutions to nonlinear stochastic rational expectation models. The paper also explains methods for using such an approximate solution to generate forecasts, simulated time paths for the model, and evaluations of expected...