We adjust current account surpluses and deficits of 57 countries in the period 2005-2009 for differences in the age structure of their populations and find that these differences can account for a significant part of the variation in the data. Among the large countries we find that the...

We propose a model that delivers endogenous variations in term spreads driven primarily by banks' portfolio decision and their appetite to bear the risk of maturity transformation. We first show that fluctuations of the future profitability of banks' portfolios affect their ability to cover for...

This paper examines empirically whether democracies allocate fewer resources to the military than dictatorships do. It employs a panel of up to 112 countries over the period 1960-2000 to estimate a standard demand for military spending model. While papers on the determinants of military spending...

This paper examines the macroeconomic effects of unexpected, exogenous, simultaneous, temporary cuts to income tax rates in an economy when the government follows a balanced budget fiscal rule and keeps money supply constant, and private agents face constraints on the ability to finance...

The policy innovations that followed the recent Great Recession, such as unconventional monetary policies, prompted renewed interest in the question of how to measure the effectiveness of such policy interventions. To test policy effectiveness requires a model to construct a counterfactual for...

This paper studies the impact of a probabilistic risk-sharing network structure on the optimal portfolio composition. We show that, even assuming identical agents, we are able to differentiate their optimal risk-choice once we assume the link-structure defining their relationship probabilistic....

Emotions are a significant determinant of consumer behaviour. A customer may get angry if he feels that he is being treated unfairly by his supplier and that anger may make him more likely to switch to an alternative provider. We model the strategic interaction between firms that choose quality...

The desire to avoid rousing community hostility may encourage firms to behave in an environmentally responsible manner. It has been conjectured that such 'informal regulation' could effectively replace formal intervention in some settings, and usefully complement it in others. We explore these...

We analyze a market populated by expected utility maximizers and smooth ambiguity-averse consumers. We study conditions under which ambiguity-averse consumers survive and affect prices in the limit. If ambiguity vanishes with time or if the economy exhibits no aggregate risk, ambiguity-averse...

A predictive regression for y(t) and a time series representation of the predictors, x(t), together imply a univariate reduced form for y(t). In this paper we work backwards, and ask: if we observe y(t), what do its univariate properties tell us about any x(t) in the "predictive space"...