The paper investigates a climate-economy model with an iso-elastic welfare function in which one parameter γ measures relative risk-aversion and a distinct parameter ρ measures resistance to intertemporal substitution. We show both theoretically and numerically that climate policy responds differently to variations in the two parameters. In particular, we show that higher γ but lower ρ leads to...

The empirical literature provides a wide range of estimates for trade elasticities at the aggregate level. Furthermore, recent contributions in international macroeconomics suggest that low (implied) values of the trade elasticity of substitution may play an important role in understanding the disconnect between international prices and real variables. However, a standard model of the internati...

The wage impact of immigration depends crucially on the elasticity of substitution between similarly skilled immigrants and natives and the elasticity of substitution between high school dropouts and graduates. This paper revisits the estimation of these elasticities. The U.S. data indicate that equally skilled immigrants and natives are perfect substitutes. The value of the second elasticity d...

In HANK, we show that fiscal policy is an appropriate macroeconomic stabilization tool at the ZLB. Fiscal achieves same aggregates and welfare as hypothetically unconstrained monetary by replicating its transmission mechanism. Consumption taxes labor replicate effects of through intertemporal substitution channel. Debt-financed lumpsum transfers a permanent increase in government debt level red...

We consider a discrete-time two-sector CES economy with sector specific external effects and partial depreciation of capital. We show that the occurrence of local indeterminacy of equilibria depends on an interplay between factor substitutability and capital depreciation. When the elasticity of substitution is less than one, local indeterminacy may occur with low depreciation of capital. When t...