We study arbitrage opportunities in diverse markets as introduced by R. Fernholz in [Fer99]. By a change of measure technique we are able to generate a variety of diverse markets. The construction is based on an absolutely continuous, but nonequivalent measure change which implies the existence...

This paper studies a dynamic market microstructure model, in which a strategic market maker competes with an informed trader. We include the presence of noise traders and limit order traders in our setup. Our model is a N-period model. We give necessary and sufficient conditions for an...

We present an order flow model framework for limit order driven markets. Different from previous models we explicitly model a reference price process that “sweeps” the limit order book as it fluctuates up and down. Our framework allows us to use any stochastic process to model this reference...

This paper studies the effect on monetary policy of a non-homogeneous degree of competition across the (two) members of a monetary union. In particular, we assess the welfare loss brought about by the use of a simple interest rate rule that does not take into account such structural differences....

This paper studies the implication, in terms of welfare and monetary policy, of unequal degrees of competition across members of a currency area. We look at two ways in which the degree of competition in the market for goods can affect welfare in a currency area. One is through different average...

The paper studies the inflation rate associated with optimal monetary and fiscal policy in a number of standard dynamic stochastic general equilibrium models with nominal price rigidities. While the focus is on Calvo-style nominal price contracts with a range of indexation rules for constrained...

This paper shows that the interaction between money growth and staggered nominal contracts gives rise to a long-run inflation-unemployment tradeoff.

This paper offers a reappraisal of the inflation-unemployment tradeoff, based on ?frictional growth? describing the interplay between nominal frictions and money growth. When the money supply grows in the presence of price inertia (due to staggered wage contracts with time discounting), the...

This paper develops a multi-period extension of the Lucas (1972) overlapping generations "island" model with endogenous monetary policy (based on the minimization of a loss function over inflation and output deviations) and stochastic realization of the "allocation" of the young people across...

This paper offers a reappraisal of the inflation-unemployment tradeoff, based on ?frictional growth,? describing the interplay between nominal frictions and money growth. When the money supply grows in the presence of price inertia (due to staggered wage contracts with time discounting), the...