We develop a dynamic model of a fishery which simultaneously incorporates random stock growth and costly capital adjustment. Numerical techniques are used to solve for the resource-rent-maximizing harvest and capital investment policies. Capital rigidities bring diminishing marginal returns to the current period harvest, and introduce an incentive to smooth the catch over time. With density dependent stock growth, however, catch smoothing increases stock variability resulting in reduced average yields. The optimal management policy balances the catch smoothing benefits against yield loss. We calibrate the model to the Alaskan pacific halibut fishery to demonstrate the main insights.

Abstract. This paper considers the problem of multi-species fisheries management when targeting individual species is costly and at-sea discards of fish by fishermen are unobserved by the regulator. Stock conditions, ecosystem interaction, technological specification, and relative prices under which at sea discards are acute are identified. A dynamic model is developed to balance ecological interdependencies among multiple fish species, and scope economies implicit in a costly targeting technology. Three regulatory regimes, species-specific harvest quotas, landing taxes, and revenue quotas, are contrasted against a hypothetical sole owner problem. An optimal plan under all regimes precludes discarding. For both very low and very high levels of targeting costs, first best welfare is close to that achieved through any of the regulatory regimes. In general, however, landing taxes welfare dominate species-specific quota regulation; a revenue quota fares the worst. JEL Classification: Q2

This paper revisits the issue of the optimal exchange rate regime in a flexible price environment.The key innovation is that we analyze this question in the context of environments where only a fraction of agents participate in asset market transactions (i.e., asset markets are segmented).We show that flexible exchange rates are optimal under monetary shocks and fixed exchange rates are optimal under real shocks. These findings are the exact opposite of the standard Mundellian prescription derived under the sticky price paradigm wherein fixed exchange rates are optimal if monetary shocks dominate while flexible rates are optimal if shocks are mostly real. Our results thus suggest that the optimal exchange rate regime should depend not only on the type of shock (monetary versus real) but also on the type of friction (goods market friction versus financial market friction).

This paper revisits the issue of the optimal exchange rate regime in a flexible price environment.The key innovation is that we analyze this question in the context of environments where only a fraction of agents participate in asset market transactions (i.e., asset markets are segmented).We show that flexible exchange rates are optimal under monetary shocks and fixed exchange rates are optimal under real shocks. These findings are the exact opposite of the standard Mundellian prescription derived under the sticky price paradigm wherein fixed exchange rates are optimal if monetary shocks dominate while flexible rates are optimal if shocks are mostly real. Our results thus suggest that the optimal exchange rate regime should depend not only on the type of shock (monetary versus real) but also on the type of friction (goods market friction versus financial market friction).

This paper studies a two country model with economies disaggregated into traded and nontraded sectors and in which investment goods as in practice are produced by combining inputs from all sectors. The model also accounts for nontraded distribution services employed in retailing traded goods to consumers. The results show that the model with multiple input investments outperforms the standard model in which sectoral output also serves as its capital. In particular, it substantially improves (a) the movements of trade balance and relative prices, (b) within country comovements of sectoral and aggregate quantities, and (c) cross-country comovements of output vis-à-vis consumption. Abstract This paper studies a two country model with economies disaggregated into traded and nontraded sectors and in which investment goods as in practice are produced by combining inputs from all sectors. The model also accounts for nontraded distribution services employed in retailing traded goods to consumers. The results show that the model with multiple input investments outperforms the standard model in which sectoral output also serves as its capital. In particular, it substantially improves (a) the movements of trade balance and relative prices, (b) within country comovements of sectoral and aggregate quantities, and (c) cross-country comovements of output vis-à-vis consumption.