We characterize the equilibrium and optimal resource allocations in a general equilibrium model of monopolistic competition with multiple asymmetric sectors and heterogeneous firms. We first derive general results for additively separable preferences and general productivity distributions, and...

Short lived arbitrage opportunities arise when prices adjust with a lag to new information. They are toxic because they expose dealers to the risk of trading at stale quotes. Hence, theory implies that more frequent toxic arbitrage opportunities and a faster arbitrageurs' response to these...

In this paper, we examine the ability of Fisher effect to describe the subjective behaviour of monetary policy responses for nations constrained by global factors. We developed and estimated a simple DSGE model for appraising the consequence of an integrated financial market predictor on...

This paper presents a general equilibrium model of interenterprise arrears, characterized by n-stage production technology with random productivity shocks. The model shows that large interenterprise arrears in transition economies may reflect substantial business risks in those countries and...

Although firms may face radically different production conditions, this dimension of firm heterogeneity is often overlooked. We model input demand across local factor markets, explicitly considering search costs which explain why firms care about both the price and availability of inputs. The...

The rapid accumulation and persistence of interenterprise credits and arrears is a fairly common phenomenon in transition economies, posing serious policy concerns. A general equilibrium model of production chains is presented to analyze this phenomenon and provide policy implications. The model...

Over the past two decades, many countries around the world have experienced substantial growth in their economies, driven by inflow of the foreign capital especially in the form of foreign direct investment (FDI). The share of net FDI in world GDP has grown five-fold through recent years, making...

Effectiveness, cost-efficiency and distribution issues are crucial for any form of future regulation. This results in the need for reliable instruments to assess regulations ex ante. Elasticities are key parameters for such instruments. We consistently estimate substitution elasticities for a...

We develop a quantitative framework in which income inequality arises endogenously in response to productivity shocks. The framework accommodates sectoral inputoutput linkages, arbitrary elasticities of factors and intermediates, and heterogeneous workers that endogenously choose to supply their...

This paper presents and estimates a dynamic stochastic general equilibrium (DSGE) small-open-economy model for the Hungarian economy. The model features different types of frictions, real and nominal rigidities which are necessary to replicate the empirical persistence of Hungarian data....