There is a general argument saying that adding derivative securities (options) to a financial market makes the market more efficient, and has therefore a stabilising effect. We investigate this claim by adding Arrow securities on future states of the world in the asset pricing model with...

In this paper we assess the stability of open economy backward looking Phillips curves estimated across two different exchange rate regimes. The time series we deal with come from the simulation of a New-Keynesian hybrid model suited for performing monetary policy analysis. The statistical...