We present a model in which investors observe the same macroeconomic data but have varying levels of information about the parameters that determine the distribution of the expected returns on investment. During a crisis that increases macroeconomic uncertainty and reduces asset prices, the threshold required return that triggers investment is lower for an informed investor than for an uninform...

— Many developing and transitioning countries have difficulty sticking to sound macroeconomic policy. International donors are pushing recipient countries to forge a public consensus on macroeconomic policy as a means to enhance sustainability and impacts on the poor. Finance and budget officials, central bank staff, and economic policymakers, however, often assume that citizens cannot understa...

Using the standard real business cycle model with lump-sum taxes, we analyze the impact of fiscal policy when agents form expectations using adaptive learning rather than rational expectations (RE). The output multipliers for government purchases are significantly higher under learning, and fall within empirical bounds reported in the literature (in sharp contrast to the implausibly low values ...

This paper examines the empirical relationship between business cycle volatility and economic freedom across countries. In a diverse sample of 85 countries, the results suggest a significantly negative relationship between volatility and a broad measure of freedom—even after controlling for other determinants of cross-country volatility and using an instrumental variables procedure to account f...

This study explores the effects of macroeconomic policies on measures of macroeconomic performance such as growth and inflation by setting up a dynamic post-Keynesian model with government and central bank interventions. In doing so, this study reconsiders the arguments in favor of a policy regime. The model in this paper generates several varieties of economic growth regimes and inflation dyna...

This paper tries to analyze the impacts of intermediate goods trade on production, consumption, investment, net exports, employment, labor wage and capital rent of Iran in its bilateral trade relations with China. This analysis has been done by modeling, solving and calibrating an international real business cycles (IRBC) model in period 1980-2009. The results show that when elasticity of subst...

Some Thoughts on Macroeconomic Fluctuations and the Timing of Labor Market Reform In this paper, I analyze the pros and cons of implementing structural reforms of the labor market in booms vs. recessions, in light of considerations of social efficiency, political viability, and macroeconomic fine tuning. While the optimal timing of a reform depends on the relative importance of several conflict...

Sovereign risk premia have risen sharply in several European countries, contributed to increased credit spreads in the private sector. If monetary policy cannot offset these credit spreads because it is constrained by the zero lower bound, sovereign risk threatens macroeconomic stability: private-sector beliefs of a weakening economy may become self-fulfilling. In this paper, we put forward a t...

Policies designed to pursue an equity-led macroeconomic growth strategy must take into account feedback effects, with distribution itself influencing macroeconomic outcomes. Under the right conditions, a more equitable distribution of income and opportunities in the form of human development can be a stimulus to growth, funding further investments in human development. Developing the policies t...