This paper develops a model with multiple steady states (low tax and unemployment rate versus high tax and unemployment rate) in which equilibrium selection is not conditioned on a sunspot variable. Instead, large enough shocks initiate unavoidable transitions from one regime to the other. The...

This paper investigates a dynamic general equilibrium model with search. In particular, search externalities are reßected by an increasing returns to scale matching function, which may imply an indeterminate equilibrium. Hence, the model is capable to generate business ßuctuations, driven by...

A number of authors have attemted to test whether the U.S. economy is in a determinate or an indeterminate equilibrium. We argue that to answer this question, one must be impose a priori restrictions on lag length that cannot be tested. We provide examples of two economic models. Model 1...

We study identiÞcation in a class of three-equation monetary models. We argue that these models are typically not identiÞed. For any given exactly identiffed model, we provide an algorithm that generates a class of equivalent models that have the same reduced form. We use our algorithm to...

Societies provide institutions that are costly to use, but able to enforce long-run relationships. We study the optimal decision problem of using self-governance for risk sharing or governance through enforcement provided by these institutions. Third-party enforcement is modelled as a costly...

When people share risk in financial markets, intermediaries provide costly enforcement for most trades and, hence, are an integral part of financial marketsu0092 organization. We assess the degree of risk sharing that can be achieved through financial markets when enforcement is based on the...

Exchanges and other trading platforms are often vertically integrated to carry out trading, clearing and settlement as one operation. We show that such vertical silos can prevent efficiency gains from horizontal consolidation of trading and settlement platforms to be realized. Independent of the...

We model the impact of bank mergers on loan competition, banks' reserve holdings and aggregate liquidity. Banks compete in a differentiated loan market, hold reserves against liquidity shocks, and refinance in the interbank market. A merger creates an internal money market that induces financial...

Based upon a large fraction of the price records used for computing the French CPI, we document consumer price rigidity in France. We first provide a methodological discussion of issues involved in estimating average price duration with micro-data. The average duration of prices in the sectors...