It is often argued that asset prices exhibit patterns incompatible with the behaviour of rational, optimizing agents. This paper proposes a rational framework which generates asset prices which appear irrational. This is accomplished by studying rational expectations equilibria in the presence...

We provide an equilibrium multi-asset pricing model with micro-founded systemic risk and heterogeneous investors. Systemic risk arises due to excessive leverage and risk taking induced by free-riding externalities. Global risk-sensitive financial regulations are introduced with a view of...

The implications of Value-at-Risk regulations are analyzed in a CARA-normal general equilibrium model. Financial institutions are heterogeneous in risk preferences, wealth and the degree of supervision. Regulatory risk constraints lower the probability of one form of a systemic crisis, at the...

We provide an equilibrium multi-asset pricing model with micro- founded systemic risk and heterogeneous investors. Systemic risk arises due to excessive leverage and risk taking induced by free-riding externalities. Global risk-sensitive financial regulations are introduced with a view of...

We consider an exchange economy with time-inconsistent consumers whose preferences are additively separable. When these consumers trade in a sequence of markets, their time-inconsistency may introduce a non-convexity that gives them an incentive to trade lotteries. If there are many consumers,...

This paper uses a small open economy model to address two outstanding issues in monetary policy: (1) what restrictions on the policy rule ensure that the central bank does not introduce real indeterminacy into the economy, and (2) what is the optimal long run rate of inflation. The small open...

Conventional cost-benefit analysis incorporates the normally reasonable assumption that the policy or project under examination is marginal in the sense that it will not significantly change relative prices. In particular, it is assumed that the policy or project does not change the underlying...

There is plenty of evidence across the EU to suggest that young people from poorer backgrounds are less likely to attend tertiary education than their better-off peers. This correlation is often used to justify monetary transfers to families with students. It is not clear, however, that these...

We conducted a survey covering 20% of villages with 200-1000 population in rural Guinea-Bissau. We interviewed household heads, care-givers of children, and their teachers and schools. We analysed results from 9,947 children, aged 7-17, tested for literacy and numeracy competency. Only 27% of...

In this study I apply a gravity-type labor-market accessibility model to the Greater London Area to investigate house price capitalization effects. The spatial scope of labor-market effects is found to be about 60 minutes. Doubling accessibility increases the utility of an average household by...