Central banks have become increasingly worried about systemic risks to the financial market and infrastructure stemming from payment systems. Failure to settle by a participant in a netting system can potentially jeopardize the settlement of other participants. The fear of a systemic crisis has...

Following Shimko (1993), a large amount of research has evolved around the problem of extracting risk neutral densities from options prices by interpolating the Black-Scholes implied volatility smile. Some of the methods recently proposed use variants of the cubic spline. These methods have the...

Empirical evidence documents substantial persistence in the adjustment process to nominal shocks. Existing open-economy models have failed either to generate interesting dynamics or found that the mechanisms are quantitatively weak. We consider the propagation of nominal shocks in a fully...

Danmarks Nationalbank introduced its annual report on financial stability in Denmark in 2000. The purpose of the analyses is to identify risks currently faced by the financial sector. As the stability in the financial sector depends on the customers' financial circumstances, and as the majority...

The paper develops a simple stochastic new open macroeconomic model in which pricesetting firms' choice between producer currency pricing and local currency pricing is endogenous. We show that, in equilibrium, firms will denominate their export price contracts in the currency of the country with...

Almost all theoretical work on how to calculate the marginal deadweight loss has been done for linear taxes and for variations in linear budget constraints. This is quite surprising since most income tax systems are nonlinear, generating nonlinear budget constraints. Instead of developing the...

The first aim of this paper is to clarify the differences and rela-tionships between cumulative advantage/disadvantage and the Matthew ef-fect. Its second aim, which is also its main contribution, is not only to present a new measure of the Matthew effect, but also to show how to esti-mate this...

This paper deals with the consequences of the assumption of negatively interdependent preferences for the shape of the optimal nonlinear income tax and the effcient level of public good provision in a setting where the policy maker maximizes an inequality averse social welfare function and the...

This paper studies optimal unemployment benefit levels and optimal proportional income tax rates over the business cycle. Previous research suggests that policy makers should make unemployment insurance (UI) dependent on the business cycle because the UI system can be used to smooth consumption...

The paper extends Ng's (1987) model of optimal taxation of diamond goods - goods that are valued solely for their costliness. We extend his findings by analyzing how other goods should be taxed in the presence of pure diamond goods; modified Ramsey rules are derived in a basic single-type model...