A model of money with multilateral matching

We develop a model of decentralized monetary exchange to examine the distributional effects of inflation across heterogeneous agents. The agents have private information about their productivity, preferences, or money holdings. Matching is multilateral and each seller is visited by a stochastic number of buyers. The good is allocated according to a second-price auction in money. In equilibrium, homogeneous buyers hold different amounts of money leading to price dispersion. We find the closed-form solution for the distribution of money holdings. Entry of sellers is suboptimal except at the Friedman rule. Inflation acts as a regressive tax.     

Extracting inflation expectations and inflation risk premia from the term structure: A joint model of the UK nominal and real yield curves

This paper analyses the UK interest rate term structure over the period since October 1992, when the United Kingdom adopted an explicit inflation target, using an affine term structure model estimated using both government bond yields and survey data. The model imposes no-arbitrage restrictions across nominal and real yields, which enables interest rates to be decomposed into expected real policy rates, expected inflation, real term premia and inflation risk premia. The model is used to shed light on major developments over the period, including the impact of Bank of England independence and the low real bond yield ‘conundrum’.     

The variability of velocity of money in a search model

We construct a dynamic equilibrium model where there is costly search in the goods market and the labor market. Incorporating shocks to money growth and productivity, we calibrate the model to the US time series data to examine the model's quantitative predictions on aggregate variables and, in particular, on the variability of consumption velocity of money. Despite the fact that money is the only asset, the model captures most of the variability of velocity in the data. It also generates realistic predictions on the moments of other variables and provides persistent propagation of the shocks. The model generates these results largely because costly search gives an important role to the extensive margin of trade.     

Inflation and productive activity in a multiple-matching model of money

This paper investigates the relationship between money growth, inflation, and productive activity in a dynamic general-equilibrium, multiple-matching framework where trade frictions are manifested by limited consumption variety. Productive activity and matching in the goods market are endogenized by a time allocation decision of work and search effort. We find that a high degree of complementarity between participation in the labor and goods markets creates a channel by which inflation can positively influence production and output. This feature arises when household preferences for consumption variety is sufficiently large and it can also lead to the multiplicity of monetary equilibria.     

Non-concavity problems in the dynamic macroeconomic models: A note

This note provides a method to convert the dynamic models in Cysne [Cysne, Rubens P., 2006. A note on the non-convexity problem in some shopping-time and human-capital models. Journal of Banking and Finance 30 (10), 2737–2745] and in Cysne [Cysne, Rubens P., 2008. A note on “inflation and welfare”. Journal of Banking and Finance 32 (9), 1984–1987] to concave optimization problems. We do this by introducing new control and state variables in the models. Cysne (2006, 2008) restrict attention to continuous time models and derive parametric conditions to use Arrow’s sufficiency theorem. When the sufficient conditions presented in Cysne (2006) are satisfied (but not under the sharper sufficient conditions presented in Cysne (2008)) we can rewrite these models as concave optimization problems even if time is discrete.     

Confronting the threat of nuclear winter

Large-scale nuclear war sends large quantities of smoke into the stratosphere, causing severe global environmental effects including surface temperature declines and increased ultraviolet radiation. The temperature decline and the full set of environmental effects are known as nuclear winter. This paper surveys the range of actions that can confront the threat of nuclear winter, both now and in the future. Nuclear winter can be confronted by reducing the probability of nuclear war, reducing the environmental severity of nuclear winter, increasing humanity's resilience to nuclear winter, and through indirect interventions that enhance these other interventions. While some people may be able to help more than others, many people—perhaps everyone across the world—can make a difference. Likewise, the different opportunities available to different people suggests personalized evaluations of nuclear winter, and of catastrophic threats more generally, instead of a one-size-fits-all approach.     

Alternative central bank credit policies for liquidity provision in a model of payments

I explore alternative central bank policies for liquidity provision in a model of payments. I use a mechanism design approach so that agents’ incentives to default are explicit and contingent on the credit policy designed. In the first policy, the central bank invests in costly enforcement and charges an interest rate to recover costs. I show that the second-best solution is not distortionary. In the second policy, the central bank requires collateral. If collateral does not bear an opportunity cost, then the solution is first best. Otherwise, the second best is distortionary because collateral serves as a binding credit constraint.     

Option pricing using a binomial model with random time steps (A formal model of gamma hedging)

This paper provides a new option pricing model which justifies the standard industry implementation of the Black-Scholes model. The standard industry implementation of the Black-Scholes model uses an implicit volatility, and it hedges both delta and gamma risk. This industry implementation is inconsistent with the theory underlying the derivation of the Black-Scholes model. We justify this implementation by showing that these adhoc adjustments to the Black-Scholes model provide a reasonable approximation to valuation and delta hedging in our new option pricing model.     

Negotiations under the threat of an auction

Many takeovers occur after one-on-one negotiations, which suggests a troubling lack of competition. We seek to determine whether acquirers in such friendly deals are truly insulated from competitive pressures. We study two countervailing influences: (1) potential but unobserved latent competition, i.e., the likelihood that rival bidders could appear, and (2) anticipated auction costs when negotiations fail. Using various proxies, we find that latent competition increases the bid premium offered in negotiated deals and that auction costs reduce the premium.     

Efficiency improvement from restricting the liquidity of nominal bonds

In a monetary search model with nominal bonds, agents face matching/taste shocks but they cannot insure, borrow or trade against such shocks. A government imposes a legal restriction that prohibits bonds from being used to buy a subset of goods. I show that this legal restriction can increase the society's welfare. In contrast to the literature, this efficiency role persists in the steady state and even when the households cannot trade assets after receiving the shocks. Moreover, it can exist when the Friedman rule is available and when the restriction is only obeyed by government agents.     

The relationship between risk control imperative and perceived causation: the case of product counterfeiting in China

The counterfeiting of safety critical products such as pharmaceuticals is a significant risk to public safety, but the literature suggests that much of the causation of counterfeiting is endogenous: the decisions of legitimate producers and consumers facilitate or incentivize the manufacture of counterfeits. This study examined what effect the perceived causation of counterfeiting risk (both the causes of counterfeiting, and the consequences caused by counterfeiting) had on the risk control imperative: the belief that more resources should be allocated to controlling this risk. This involved a questionnaire survey of individuals in China, asking them to respond to the risks arising from the counterfeiting of specific safety-critical product types. The study found that although some causes of counterfeiting were emphasized much more strongly than others (notably the failure of the authorities, profiteering among legitimate producers and the presence of criminal organizations), the less emphasized causes were still judged as being relevant. The study found that the association between the risk control imperative and both the perceived scale of risk and its causal origins varied across different product types. In one case, the scale of risk was virtually unrelated to control imperative, but in all cases, at least one of the causal factors, and at least one of the consequential factors, explained variation in control imperative. A qualitative comparative analysis also indicated specifically that control imperative was lower if an actor who was strongly implicated in the cause of the risks was also a bearer of the risks.     

Choices in the face of uncertainty: the international futures (IFs) model

The International Futures (IFs) modeling project has roots in both the world modeling projects of the 1970s (including the early Club of Rome models) and the GLOBUS modeling project of the 1980s. It has, however, added extensive capabilities for helping students and analysts think about choices in the face of uncertainty. The third edition of the International futures book and computer simulation have extended the analysis horizon and enhanced analysis potential, with particular focus in two areas: (1) the possible transition towards sustainability in the twenty-first century and (2) sociopolitical change within countries and in the global system. IFs is evolving from a global model to a ‘global modeling system’ that allows analysis of data and analytical relationships across a country-level database. This article reviews the evolution of IFs and the current model. It concludes by discussing challenging issues in the contemporary world that may be explored by students of the future using the IFs model.     

Accounting for Trends in Productivity and R&D: A Schumpeterian Critique of Semi-Endogenous Growth Theory

This paper argues that long-run trends in R&D and TFP are more supportive of fully endogenous "Schumpeterian" growth theory than they are of semi-endogenous growth theory. The distinctive prediction of semi-endogenous theory that sustained TFP growth requires sustained growth of R&D input is not supported by co-integration tests and forecasting exercises, as TFP growth has been stationary even though the growth rate of R&D input has fallen three-fold since the early 1950s. In contrast, the prediction of Schumpeterian theory that sustained TFP growth requires a sustained fraction of GDP to be spent on R&D is not contradicted by similar tests.     

世界货币战阴影高悬,中国积极应对

2010年,中国反复在国际场合阐述,＂货币战没有赢家＂。2011年,中国仍是货币稳定的积极推动者,亦是全球货币战的坚定反对者     

Identity narratives under threat: A study of former members of Arthur Andersen

This paper examines the processes by which individuals work their sense of organizational and professional identity in the aftermath of a professional failure. Drawing on twenty-five interviews carried out with former members of Arthur Andersen who mostly worked for the firm in Canada and the United Kingdom, we investigate interviewees’ identity work ensuing from the breakdown of the firm. Specifically, identity work comprises processes by which individuals reflectively seek to maintain or revise their sense of identification with the AA organization and also with the public accounting profession, along with developing self-understandings regarding causes and consequences ensuing from the firm’s collapse. Our analysis indicates that four interpretive schemes or patterns mainly characterize interviewees’ identity work: disillusion; resentfulness; rationalization; and hopefulness. Each of these patterns can be viewed as conveying a distinct representation of what “truly” happened within AA. In this sense, identity work, sense-making and truth contests are inextricably linked altogether. Moreover, the present paper underlines the pertinence of studying entangled processes of identity work and sense-making in order to better understand how broader social forces or discourses (e.g., commercialization and risk) are experienced and translated by the self in the context of identity-threatening events. That is, the identity work/sense-making nexus constitutes a relevant theoretical anchoring to study the circulation of discourses in society.     

Education, redistribution and the threat of brain drain

We analyze how the threat of brain drain affects redistributive government policies and net incomes of skilled and unskilled workers. Our analysis is based on a model that captures human capital formation, credit market constraints and tax avoidance activities. We characterize how decreasing migration costs for skilled workers shape the time-consistent policies of a government that wants to shift resources from skilled to unskilled workers. Starting from a closed economy, declining migration costs first increase net incomes of both skilled and unskilled workers, and then decrease net incomes of all households. There is a conflict of interest only for very low migration costs. In this case, skilled workers start to benefit from a further rise in their mobility, but now at the expense of the unskilled labor force.      

The threat of corporate groups and the insolvency connection

This paper attempts to shed some light on the issue referred to by the term ‘group threat’. The factual appearance of corporate groups will be emphasized, as well as the question of what particular dangers arise from groups of legal entities. It will be argued that the source of group threats lies in the supremacy of group interest over the interests of affiliates, particularly in groups acting as a single unit. However, while efficiency gains inherent in group structures have attracted considerable attention in the debate about the insolvencies of corporate groups, the aspect of how the restriction of group threats can be reconciled with these efficiency‐preservation concepts has been neglected. This appears of some concern given the fact that group threats and group synergy effects are part of the same coin. Both sides of the Janus‐head ought to be considered in insolvency concepts and an attempt will be made to put the specific aspect of group threats into the wider context of group insolvencies. Existing approaches will be introduced, summarized and categorized, with a particular view taken of their common characteristics. It is argued that most insolvency concepts suffer from the same fundamental deficiencies: the focus on the structure of groups, which makes the very nature of integrated companies difficult to grasp. Consequently, this calls into question the application of these concepts and leads, furthermore, to significant collateral damage in the shape of principles central to company law. Resulting from these shortcomings and from the insight that the supremacy of the group interest constitutes the fundamental source of group characteristics, this paper suggests as an alternative that the focus be placed on wrongful conduct, the argument being that it is not the static structure, but the way the group is directed and ruled, which constitutes the decisive criterion for insolvency concepts. The understanding of group threats is therefore the key to a satisfactory approach to group specific challenges in insolvency. Copyright © 2009 John Wiley & Sons, Ltd.     

Bargaining and the value of money

Search models of monetary exchange have typically relied on Nash [1950. The bargaining problem. Econometrica 18, 155-162] bargaining, or strategic games that yield an equivalent outcome, to determine the terms of trade. By considering alternative axiomatic bargaining solutions in a search model with divisible money, we show that the properties of the bargaining solutions do matter both qualitatively and quantitatively for questions of first-degree importance in monetary economics such as: (i) the efficiency of monetary equilibrium; (ii) the optimality of the Friedman rule and (iii) the welfare cost of inflation.