What is the main limitation of much modern macro-economic theory, among the failings pointed out by William R. White at the 2010 Mayekawa Lecture? We argue that the main deficiency is a failure to incorporate the possibility of default, including that of banks, into the core of the analysis....

What is the main limitation of much modern macroeconomic theory, among the failings pointed out by William R. White at the 2010 Mayekawa Lecture? We argue that the main deficiency is a failure to incorporate the possibility of default, including that of banks, into the core of the analysis. With...

This paper introduces agent heterogeneity, liquidity, and endogenous default to a DSGE framework. Our model allows for a comprehensive assessment of regulatory and monetary policy, as well as welfare analysis in the different sectors of the economy. Due to liquidity and endogenous default, the...

We define continuous-time dynamics for exchange economies with fiat money. Traders have locally rational expectations, face a cash-in-advance constraint, and continuously adjust their short-run dominant strategy in a monetary strategic market game involving a double-auction with limit-price...

We define continuous-time dynamics for exchange economies with fiat money. Traders have locally rational expectations, face a cash-in-advance constraint, and continuously adjust their short-run dominant strategy in a monetary strategic market game involving a double-auction with limit-price...

We analyze a market game where traders are heterogeneous with respect to their rationality level and have asymmetric information. The market mechanism results into a statistical equilibrium, where traders randomise among their available actions due to their limited rationality. We provide a...

I address the issue of the [`]number' of international monetary equilibria that the international finance model of Geanakoplos and Tsomocos (2002) possesses. The mainstream competitive model has locally unique equilibria with respect to the real side of the economy; however, it manifests nominal...

We define continuous-time dynamics for exchange economies with fiat money. Traders have locally rational expectations, face a cash-in-advance constraint, and continuously adjust their short-run dominant strategy in a monetary strategic market game involving a double-auction with limit-price...

The achievement of financial stability is one of the most pressing issues today. This timely and innovative book provides an analytical framework to assess financial (in)stability as an equilibrium phenomenon compatible with the orderly functioning of a modern market economy.