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This paper studies tariff-tax reforms in a calibrated two-region global New Keynesian model composed of a developing and an advanced region. In our baseline calibration, a revenue-neutral reform that lowers tariffs in developing countries can reduce domestic welfare. The reason is that the increase in developing countries welfare due to higher output is dominated by the welfare losses stemming from the deterioration of the terms of trade. On the other hand, the reform increases output and welfare in the advanced countries and in the world as a whole. The effects that we highlight have not been

Recent research has stressed the inconsistency between empirical evidence and the theoretical prediction of both the standard real business cycle and the New Keynesian models regarding the impact of fiscal shocks on consumption. Some authors have attempted to bridge this gap by relying on assumptions about the effects of government spending on preferences and production, or on deviations from the intertemporal optimizing framework. In this paper we follow a different route. We show that introducing at the same time imperfect competition, sticky prices and deviations from Ricardian equivalence through an overlapping generations model helps to solve the inconsistency between theory and data. Our paper can also be seen in the light of the classic controversy between Keynesians and monetarists on the effectiveness of fiscal policy. From this angle, our model can be considered a reincarnation of the classic work of Blinder and Solow (Journal of Public Economics, Vol. 2 (1973), pp. 319–337).

Despite the rapid economic growth and poverty reduction, inequality in Asia worsened during last two decades. We focus on the determinants of growth inclusiveness and suggest options for reform. A cross cross-country empirical analysis suggests that fiscal redistribution, monetary policy aimed at macro stability, and structural reforms to stimulate trade, reduce unemployment and increase productivity are important determinants of inclusive growth. The main policy implication of our analysis is that there is still room to strengthen such policies in Asia to better achieve growth with shared prosperity. In particular, scenario simulations based on our results suggests that the effect of expanding fiscal redistribution on inclusive growth could be sizeable in emerging Asia, since the estimated improvement in our proxy of inclusive growth -- a measure of growth in average income "corrected" for the equity impact---ranges from about 1 to about 8 percentage points. --Abstract

Cover Page -- Title Page -- Copyright Page -- Contents -- Tables -- Figure -- I. Introduction -- II. The Model -- A. Households -- B. The Government -- C. Firms -- D. The Consolidated Budget Constraint -- E. The Initial Steady State -- III. Parameterization -- IV. Effects of a Unilateral Tariff Reduction -- Figure 1. Effects of a Unilateral Domestic Tariff Reduction -- V. Value of WTO Trade Agreements -- Figure 2. Effects of Reciprocal Trade Liberalization -- Table 1. Parameterization of the Model -- Table 2. DPV of a WTO Trade Agreement as the Percentage of Consumption -- Table 3. Import-to-GDP Ratio and the Value of a WTO Trade Agreement -- Table 4. Sensitivity Analysis: The Role of Within-Country Substitutability and the Frisch Elasticity of Labor Supply -- VI. Conclusions -- References -- Footnotes

Japan's high corporate savings might be holding back growth. We focus on the causes and consequences of the current corporate behavior and suggest options for reform. In particular, Japan's weak corporate governance—as measured by available indexes—might be contributing to high cash holdings. Our empirical analysis on a panel of Japanese firms confirms that improving corporate governance would help unlock corporate savings. The main policy implication of our analysis is that comprehensive corporate governance reform should be a key component of Japan's growth strategy

This paper focuses on the macroeconomic and budgetary impact of tax reforms in a New Keynesian two-country model. Our results show that both income and consumption unilateral tax rate reductions do not constitute a ""free lunch"", in the sense that they have negative budgetary consequences for the country which implements them. In addition, the degree of self-financing implied by our model is in the 8½-24 percent range. Since the degree of self-financing estimated in previous literature was larger, we conclude that in our model not only the ""lunch"" is not ""free"", but is also not that ""che

This paper focuses on the trade-off faced by governments in deciding the allocation of public expenditures between productivity-enhancing public infrastructures and utility-enhancing public consumption. From the modeling point of view, the paper augments a standard New Open Economy Macroeconomics (NOEM) model by introducing productive public infrastructures. The results show that a temporary increase in the domestic stock of public capital financed by a reduction in public consumption reduces domestic welfare in the short run because the temporary gains from higher productivity do not compensa