Past empirical research on monetary policy in open economies has found evidence of the 'delayed overshooting', the 'forward discount' and the 'exchange rate' puzzles. We revisit the effects of monetary policy on exchange rates by applying Uhlig's (2005) identification procedure that involves...

We propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions. Unlike most of the previous literature this approach does not require that the contemporaneous reaction of some variables to fiscal policy shocks be set to zero or need additional...

We present a dynamic general equilibrium model with agency costs, where heterogenous firms choose among two alternative instruments of external finance - coporate bonds and bank loans. We characterize the financing choice of firms and the endogeous financial structure of the economy. The...

The goal of this paper is to examine the shape of the Laffer curve quantitatively in a simple neoclassical growth model calibrated to the US as well as to the EU-15 economy. We show that the US and the EU-15 area are located on the left side of their labor and capital tax Laffer curves, but the...

Linear Methods are often used to compute approximate solutions to dynamic models, as these models often cannot be solved analytically. Linear methods are very popular, as they can easily be implemented. Also, they provide a useful starting point for understanding more elaborate numerical...

This paper discusses the paper The Source of Historical Economic Fluctuations: An Analysis using Long-Run Restrictions by Neville Francis and Valerie A. Ramey. It argues that these authors have made great progress both in the precise measurement of labor input as well as determining the effect...

We examine the coexistence of banks and financial markets, studying a credit market where the qualities of investment projects are not observable and the investment decisions of entrepreneurs are not contractible. Standard banks can alleviate moral-hazard problems by securing a portion of a...

This paper poses the following question: Is it possible to improve welfare by increasing taxes and throwing away the revenues? This paper demonstrates that the answer to this question is yes. We show that there may be welfare gains from taxing capital income even when the additional capital...

This paper explores the optimal risk sharing arrangement between generations in an overlapping generations model with endogenous growth. We allow for nonseparable preferences, paying particular attention to the risk aversion of the old as well as overall life-cycle risk aversion. We provide a...