We show that the vertical delegation of decision-making authority to agent firms can act as a credible strategic commitment even when contracts are unobservable (or renegotiable) if and only if multilateral delegation is combined with decentralized ownership of the agent firms. In this case, the...

In this paper we argue that authorities aid cooperation by means ofdirect coordination or the enforcement of re-commitment devices suchas contract laws.Credible threats of violence allow this role. In alocal interaction model, an authority forms if mutually connected individuals with sufficient...

This paper studies the interaction between monetary and fiscal authorities while investors are coordinating on a speculative attack. The authorities want to achieve specific targets for output and inflation but also to avoid a regime change (i.e. sovereign default). They use the traditional...

Computational methods both open the frontiers of economic analysis and serve as a bottleneck in what can be achieved. Using the quantum Monte Carlo (QMC) algorithm, we are the first to study whether quantum computing can improve the run time of economic applications and challenges in doing so....

When do flexible exchange rates prevent monetary and financial conditions from spilling over across currencies? We examine a model in which international investors strategically supply capital to a small inflation-targeting economy with flexible exchange rates. For some combination of...

Followers of law, politics and business commonly relate stories of individuals who appear to predict an expected self-performance level below what they believe likely. Candidates, attorneys and firms sometimes seem to under-predict their own capacities. Insofar as individuals typically construct...

If policy makers in developing countries pursue "bad" economic policies, policy conditionality may provide financial leverage which induces them not to choose these policies. When is such policy conditionality beneficial? We point out that whether conditionality has a beneficial short run impact...

One role of monetary policy is to coordinate expectations in the economy and greater transparency of monetary policy may lead to greater coordination. But if transparent monetary policy helps coordinate expectations, then it must also magnify mistakes

Low key rates hurt the profits of deposit-taking institutions in a differentiated Bertrand game if there is neither a tax on banknotes, nor a limit on its quantity, nor a reduction of its quality. By making the electronic dollar the unit of account and taxing paper currency, the central bank can...

This paper analyses the consequences for monetary policy in the presence of currencies issued by firms. Such currencies generate seignorage revenues and information on consumers. In a benchmark model of imperfectly competing firms, information breaks the usual portfolio indeterminacy as in...