Public provision of a private goods is justified on efficiency grounds in a modelwith no redistributive preferences. A government’s involvement in the provision of a private good generates information about preferences that facilitatesmore efficient revenue extraction for the provision of public goods. Public provision of the private good improves economic efficiency under a condition that is a...

This paper presents a model where opening the capital account of an economy causes more bankruptcies to take place in the non tradables sector. Non tradable …rms must forecast the future state of the economy when investing since the demand for their goods depends on this. In our model the interest rate is a powerful signal that non tradable …rms use when the capital account is closed, but its i...

A dynamic general-equilibrium model with limited participation in financial markets is constructed to study the determination of nominal exchange rates in a small open economy with tradable and non-tradable goods. The qualitative and quantitative implications of this framework are assessed under flexible prices. Then, the panel dynamic OLS regression is applied to seek the empirical support for...

The paper investigates whether deviations from the law of one price can attributed to real factors, such as transportation and distribution costs. Even if trade is costly, the prices of a good at different locations will be linked as long as the good is traded. Instead of the usual iceberg assumption, I model costly trade as a transportation sector that uses real resources with potentially diff...

The paper investigates whether deviations from the law of one price can attributed to real factors, such as transportation and distribution costs. Even if trade is costly, the prices of a good at di.erent locations will be linked as long as the good is traded. Instead of the usual iceberg assumption, I model costly trade as a transportation sector that uses real resources with potentially diffe...

This paper presents a two-country model in which consumers’ utility from tradable goods depends on their consumption of complementary goods and services. The model is consistent with the stylized fact that markups are higher in rich countries: In countries with more complementary goods and services consumer demand is less elastic, enabling monopolistically competitive firms to charge higher pri...

the relationship between productivity of economic sectors, effective real exchange rate, and purchasing power is a burning economic issue. based on the “balassa – samuelson” theory, higher economic productivity for tradeable goods leads to an increase in effective real exchange rate which is indicative of higher value of domestic money and higher purchasing power of money. the purpose of this s...