We argue that ceteris paribus, introducing a habit that resolves the equity premium puzzle is equivalent to increasing the coefficient of relative risk aversion. Thus, if habit is modeled subject to the constraint that the Arrow-Pratt coefficient of relative risk aversion is held at a constant...

The purpose of our work is to explore contagious financial crises. To this end, we use simplified, thus numerically solvable, versions of our general model [Goodhart, Sunirand and Tsomocos (2003)]. The model incorporates heterogeneous agents, banks and endogenous default, thus allowing various...

China has had a remarkably high ratio of investment to output throughout the period of economic reform, surpassing almost all other economies, whether developed or developing.  The high investment rate is in turn an important proximate determinant of China's high rate of economic growth.  This...

As financial stability has gained focus in economic policymaking, the demand for analyses of financial stability and the consequences of economic policy has increased. Alternative macroeconomic models are available for policy analyses, and this paper evaluates the usefulness of some models from...

This paper first extends the canonical General Equilibrium with Incomplete Markets (GEI) model with money and default to allow for competitive banking and financial instability. Second, it introduces capital requirements for the banking sector to assess the short and medium term macroeconomic...

This paper models limit order books where each trader is uncertain of the underlying distribution in the asset`s value to others. If this uncertainty is rapidly resolved, fleeting limit orders are submitted and quickly cancelled. This enhances liquidity supply, but leaves intact established...

This paper contains a General Equilibrium model of an economy with Incomplete Markets (GEI) with money and default. The model is a simplified version of the real world consisting of a non-bank private sector, banks, a Central Bank, a government and a regulator. The model is used to analyse...

We provide a model of coalitional bargaining with claims in order to solve games with non-transferable utilities and externalities.  We show that, for each such game, payoff configurations exist which will not be renegoiated.  In the original game derived from these payoff configurations, we...

We model corporate governance in a world with competitive securities markets as well as markets for corporate assets.  We show that varying the liquidity and opacity of corporate assets, the vitality of the market for corporate control, and the costs of enforcing shareholder rights to cash...

We compare the most common methods for selling a company or other asset when participation is costly: a simple simultaneous auction, and a sequential process in which potential buyers decide in turn whether or not to enter the bidding.  The sequential process is always more efficient.  But...