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This paper highlights the importance of debt composition in setting optimal fiscal and monetary policy over short-run business cycles and in the long run. Nominal debt as state-contingent debt can be a significant policy tool to reduce the volatility of distortionary government policy, thereby reducing macroeconomic volatility while increasing equilibrium output and consumption. The welfare gain from using nominal debt to hedge against shocks to the government budget is as large as the welfare gain from the ability to issue debt.

Debts, Public. --- Monetary policy. --- Fiscal policy. --- Tax policy --- Taxation --- Economic policy --- Finance, Public --- Monetary management --- Currency boards --- Money supply --- Debts, Government --- Government debts --- National debts --- Public debt --- Public debts --- Sovereign debt --- Debt --- Bonds --- Deficit financing --- Government policy --- Macroeconomics --- Money and Monetary Policy --- Public Finance --- Labor --- Financial Markets and the Macroeconomy --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Stabilization --- Treasury Policy --- Debt Management --- Sovereign Debt --- National Government Expenditures and Related Policies: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Labor Economics: General --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Demand and Supply of Labor: General --- Public finance & taxation --- Labour --- income economics --- Monetary economics --- Welfare & benefit systems --- Expenditure --- Consumption --- Currencies --- Labor taxes --- National accounts --- Taxes --- Labor supply --- Expenditures, Public --- Economics --- Labor economics --- Money --- Income tax --- Labor market --- United States --- Income economics

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Over the past decades, workers' remittances have grown to become one of the largest sources of financial flows to developing countries, often dwarfing other widely-studied sources such as private capital and official aid flows. While it is undeniable that remittances have poverty-alleviating and consumption-smoothing effects on recipient households, a key empirical question is whether they also serve to promote long-run economic growth. This study tackles this question and addresses the main shortcomings of previous empirical work, focusing on the appropriate measurement, and incorporating an instrument that is both correlated with remittances and would only be expected to affect growth through its effect on remittances. The results show that, at best, workers' remittances have no impact on economic growth.

Capital movements. --- Economic development. --- Emigrant remittances. --- Emigration and immigration -- Economic aspects. --- Econometrics --- Exports and Imports --- Investments: General --- Macroeconomics --- Remittances --- Aggregate Factor Income Distribution --- Estimation --- Investment --- Capital --- Intangible Capital --- Capacity --- International economics --- Econometrics & economic statistics --- Outward remittances --- Income --- Estimation techniques --- Capital accumulation --- International finance --- Emigrant remittances --- Econometric models --- Saving and investment --- United States

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This paper uses a stochastic dynamic general equilibrium model to investigate the influence of countercyclical remittances on the conduct of fiscal and monetary policy and trace their effects on real and nominal variables in a business cycle setting. We show that remittances raise disposable income and consumption, and insure against income shocks, thereby raising household welfare. However, remittances increase the correlation between labor and output, thereby producing a more volatile business cycle and increasing output and labor market risk. Optimal monetary policy in the presence of remittances deviates from the Friedman rule, highlighting the need for independent government policy instruments.

Electronic books. -- local. --- Emigrant remittances -- Econometric models. --- Fiscal policy -- Econometric models. --- Monetary policy -- Econometric models. --- Political Science --- Law, Politics & Government --- Immigration & Emigration --- Emigrant remittances --- Fiscal policy --- Monetary policy --- Econometric models. --- Tax policy --- Taxation --- Immigrant remittances --- Remittances, Emigrant --- Government policy --- Economic policy --- Finance, Public --- Foreign exchange --- Exports and Imports --- Labor --- Macroeconomics --- Financial Markets and the Macroeconomy --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Stabilization --- Treasury Policy --- Remittances --- Demand and Supply of Labor: General --- Aggregate Factor Income Distribution --- Macroeconomics: Consumption --- Saving --- Wealth --- Personal Income and Other Nonbusiness Taxes and Subsidies --- International economics --- Labour --- income economics --- Welfare & benefit systems --- Labor supply --- Income --- Consumption --- Labor taxes --- Balance of payments --- National accounts --- Taxes --- International finance --- Labor market --- Economics --- Income tax --- United States --- Income economics

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Given the large size of aggregate remittance flows (billions of dollars annually), they should be expected to have significant macroeconomic effects on the economies that receive them. This paper directly addresses the two main issues of interest to policymakers with regard to remittances--how to manage their macroeconomic effects, and how to harness their development potential--by reporting the results of the first global study of the comprehensive macroeconomic effects of remittances on recipient economies. In broad terms, the findings of this paper tend to confirm the main benefit cited in the microeconomic literature: remittances improve households' welfare by lifting families out of poverty and insuring them against income shocks. The findings also yield a number of important caveats and policy considerations, however, that have largely been overlooked. The main challenge for policymakers in countries that receive significant flows of remittances is to design policies that promote remittances and increase their benefits while mitigating adverse side effects. Getting these policy prescriptions correct early on is imperative. Globalization and the aging of developed economy populations will ensure that demand for migrant workers remains robust for years to come. Hence, the volume of remittances likely will continue to grow, and with it, the challenge of unlocking the maximum societal benefit from these transfers.

Emigrant remittances. --- Emigration and immigration -- Economic aspects. --- Emigration and immigration. --- Exports and Imports --- Foreign Exchange --- Labor --- Macroeconomics --- Taxation --- Remittances --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Aggregate Factor Income Distribution --- Macroeconomics: Consumption --- Saving --- Wealth --- International economics --- Currency --- Foreign exchange --- Welfare & benefit systems --- Labour --- income economics --- Outward remittances --- Real exchange rates --- Income --- Consumption --- Balance of payments --- National accounts --- International finance --- Emigrant remittances --- Economics --- United States --- Income economics