The paper examines the impacts of ambiguity and ambiguity attitudes on macro-economic "Big Push" model. By formally modelling ambiguity, optimism and pessimism in economic industrialization, we show the results with Keynesian flavour: sufficient optimism can create the "Big Push" to help the...

This paper discusses the potential benefits of monetary policy rules for transition economies [TEs]. It is argued that the nominal interest rate may fail to be the appropriate instrument in such rules. One reason is the amount of non-calculable political and economic risk inherent in TEs. These...

Loss of confidence is interpreted as an increase in the ambiguity experienced by investors who maximize Choquet Expected Utility. Currency crises are modelled to resemble bankruns. Using countries having fragile financial systems, a model of twin crises is obtained. An exogenous interim loss of...

We study the impact of ambiguity on financial intermediation in an economy where agents have random liquidity needs. The ambiguity the agents face is modeled by the degree of confidence in their additive beliefs. We compare an optimal liquidity allocation with the allocation achieved by trade in...

In referring to the ‘animal spirits’ of investors, Keynes had already pointed to a basic distinction between ‘calculable’ and ‘non-calculable’ risk or ‘ambiguity’. The purpose of this paper is to discuss the effects of ambiguity on the public’s expectations about inflation and...