The focus is upon equilibrium real exchange rates, optimal external debt and their interaction, in a world where both the return on investment and the real rate of interest are stochastic variables. These theoretically based measures are applied empirically to answer the following questions:...

In this paper we study the link between elections, fiscal policy and aggregate fluctuations. The set-up is a stylized dynamic stochastic general equilibrium model incorporating both technology and political re-election shocks. The later are incorporated via a two-party model with elections. The...

By using their financial reserves efficiently, pension funds can smooth shocks on asset returns, and can thus facilitate intergenerational risk-sharing. In addition to the primary benefit of improved time diversification, this form of risk allocation affords the additional benefit of allowing...

Based on the Ramsey equation and an ethically motivated rejection of pure utility time discount, the Stern Review on the Economics of Climate Change concentrates on the use of the elasticity of marginal utility ç in the intergenerational social welfare function. We support this position by...

In monetary models in which agents are subject to trading shocks there is typically an ex-post inefficiency in that some agents are holding idle balances while others are cash constrained. This inefficiency creates a role for financial intermediaries, such as banks, who accept nominal deposits...

We show experimentally that fairness concerns may have a decisive impact on both the actual and the optimal choice of contracts in a moral hazard context. Explicit incentive contracts that are optimal according to self-interest theory become inferior when some agents value fairness. Conversely,...

Multi-unit auctions are sometimes plagued by the so-called exposure problem. In this paper, we analyze a simple game called the chopstick auction' in which bidders are confronted with the exposure problem. We do so both in theory and in a laboratory experiment. In theory, the chopstick auction...