Using a New-Keynesian flexi-price model with external habit formation in consumption and labor supply, we identify the channels underlying the Easterlin Paradox (or “Happiness Inertia”, its generalization). These include whether external habit formation is in “difference” or “ratio”...

We consider two aspects of the commitment problem in price regulation with lobbying the ratchet effect and the hold-up problem. We set out a dynamic model of price regulation with asymmetric information where the regulated firm can ‘buy influence’ in a lobbying equilibrium. Firms can sink...

This note reassesses the basic result in Mukhopadhaya (2003) that, when jurors may acquire costly signals about a defendant’s guilt, with a larger jury size the probability of reaching a correct verdict may in fact fall, contrary to the Condorcet Jury Theorem. We show that if the jurors...

This paper presents a model in which firms invest on their customer-networks to maintain current and future profits. The model is used to illustrate how the costs of maintaining networks and uncertainties about the customer-networks reduce the importance of making investments on the...

This paper explores the similarity of the underlying economic problems that lead to the establishment of (a) independent central banks to operate national monetary policies and (b) independent regulatory agencies for telecommunications and other utility service industries. We show that, in both...

Over the course of the 1990s economists appeared to favour exchange rate regimes that were either completely flexible or rigidly fixed through mechanisms such as currency boards. According to this "bipolar" view of exchange rates, intermediate regimes were deemed to be ineffective and prone to...

We reassess the gains from monetary policy coordination within the confines of the canonical NOEM in the light of three issues. First, the literature uses a number of cooperative and non-cooperative equilibrium concepts that do not always clearly distinguish commitment and discretionary...

The paper examines the interrelationship between fiscal and monetary policy in a two-country monetary union. The worst scenario occurs when an independent central bank (CB sets the nominal interest rate and responds to rising government debt/GDP ratios by monetisation. The result is high...

This paper presents an empirical study of the channels of influence from uncertainty to fixed investment suggested by real options theory. Using panel data from the Confederation of British Industry (CBI) Industrial Trends Survey, we report OLS estimates of the impact of uncertainty on...