When a policymaker introduces a novel policy, she will not know what the citizens' choices will be under the policy. In the face of novel policies, citizens themselves may have to construct new choice sets. Such choice construction imparts inherent ambiguity to novel policy implementation: the...

Evidence in the applied literature indicates that policies intended to stimulate positive externalities via coercion can backfire. For example, Davis (2008) finds that when in 1989, the government of Mexico City tried to control air pollution by banning most drivers from driving their vehicle...

We study the problem of potentially spurious attribution of dependence in moderate to large samples, where both the number of variables and length of variable observations are growing. We approach this question of double asymptotics from both theoretical and empirical perspectives. For...

We present a framework for modelling optimum capital adequacy in a dynamic banking context. We combine the (static) capital adequacy framework of Repullo (2013) with a dynamic banking model similar to that of Corbae and D`Erasmo (2014), with the extra feature that the probability of systemic...

Extreme events affect both the real economy and financial markets, and it is valuable to understand their interrelationship. We analyze the likelihood of crises in the macroeconomy and in financial markets. We compare rare disaster data from Barro and Jin (2011), crisis data from Reinhart and...

Where do central bank priors come from and how do policymakers evaluate a model before empirical probabilities are available? To address these questions, we analyze two central banks that choose priors about a rare disaster with the help of expert policy teams. Policymakers are misspecification...

Decision theory has relatively little to say about the formal choice of priors. We pursue the issue of prior choice in a framework that builds on consumer theory. We analyze discovery decisions of a reasoner, in an environment of hypotheses with heterogeneous, subjective plausibility. We...

.

.

.