This paper investigates the properties of distortions that manifest themselves as wedges in the equilibrium conditions of the neoclassical growth model across a sample of OECD countries for the 1970-2011 period. The quantitative relevance of each wedge and its robustness in generating...

This paper examines the stability of the basic regression underpinning the forward-discount anomaly for 20 developed and 32 developing countries. It finds that the correlation between the change of the spot exchange rate and forward discount is piece-wise linear in every country, involving...

In this paper I compare the performance of three approaches to modeling temporal instability of the relationship between the euro-dollar exchange rate and macroeconomic fundamentals. Each of the three approaches considered -- adaptive learning, Markov-switching and Imperfect Knowledge Economics...

In the financial accelerator literature pioneered by Bernanke, Gertler and Gilchrist (1999) entrepreneurs are myopic and lenders suboptimally choose a safe rate of return on their loans. We derive the optimal lending contract for forward looking entrepreneurs and provide three main results....

We study cooperative and non-cooperative fiscal policy in an open economy model where cross-country risk sharing is imperfect and countries face terms of trade externalities. We show that the optimal form of fiscal cooperation, or fiscal union, is defined by one parameter: the Armington...

I develop a model of strategic communication between an uninformed receiver and a partially informed sender who is averse to lying. The sender's cost of lying is endogenous, depending on the receiver's beliefs induced by the sender's message, rather than on its exogenous formulation. One of my...

I introduce a noncooperative coalitional bargaining model for characteristic function form games. A player not only buys out other players' resources and rights with upfront transfers as in Gul (Econometrica, 1989), but also strategically chooses partners instead of bargaining with a randomly...

An individual with present bias is one who is particularly impatient for consumption now at the expense of consumption later, but less impatient between any two dates in the future. A hypothesis for the cause of present bias is that immediate consumption is subject to temptation, whereas future...

I document the empirical evidence showing that the size premium only exists when the median book-to-market ratios in the market is high. I argue that this evidence supports the hypothesis that the size effect is a consequence of market frictions and not a risk factor priced in equilibrium. High...

We propose a Generalized Quadratic Utility (GQU) model for an incomplete demand system with binding non-negativity constraints which is flexible in income and price effects. The model accounts for zero consumption using choke prices identified by Kuhn-Tucker conditions. The GQU demand system can...