On Ponzi schemes in infinite horizon collateralized economies with default penalties

We show, by means of an example, that in models where default is subject to both collateral repossession and utility punishments, opportunities for doing Ponzi schemes are not always ruled out and (refined) equilibria may fail to exist. This is true even if default penalties are moderate as defined in Páscoa and Seghir (Game Econ Behav 65:270–286, 2009). In our example, asset promises and default penalties are chosen such that, if an equilibrium does exist, agents never default on their promises. At the same time collateral bundles and utility functions are such that the full repayment of debts implies that the asset price should be strictly larger than the cost of collateral requirements. This is sufficient to induce agents to run Ponzi schemes and destroy equilibrium existence.     

Life beyond the Washington Consensus: An Introduction to Pro-poor Macroeconomic Policies

Abstract

This paper develops a rationale for the recession-induced inflation hypothesis. Within a conflicting claims framework we present a model in which both price leaders and organized workers set their nominal prices on the basis of a desired profit rate and a real wage target respectively. We argue that an absolute cost advantage in concentrated industries (for instance in fixed costs) may provide oligopolistic leaders sufficient margin to raise prices and restore a desired level of profitability during a recession. The resultizng unstable income distribution will set off an inflationary spiral if the firm's advantage in selling its output imparts an upward bias to the flexibility of input prices (specifically wages). Taking into consideration different scenarios for workers' bargaining power we present a simple simulation experiment to analyze the inflation and real wage paths of the economy after a negative output shock. When we endogenize output, we show that for a high degree of the bargaining power, output is likely to converge to a higher steady-state value.     

OPTIMAL RULES FOR PATENT RACES*

There are two important rules to patent races: minimal accomplishment necessary to receive the patent and the allocation of the innovation benefits. We study the optimal combination of these rules. A planner, who cannot distinguish between competing firms in a multistage innovation race, chooses the patent rules by maximizing either consumer or social surplus. We show that efficiency cost of prizes is a key consideration. Races are undesirable only when efficiency costs are low, firms are similar, and social surplus is maximized. Otherwise, the optimal policy involves a race of nontrivial duration to spur innovation and filter out inferior innovators.     

Bank loan portfolios and the Canadian monetary transmission mechanism

Abstract .  Following a monetary tightening, bank loans to consumers decrease. This is true for both mortgage and non-mortgage loans, and it is true for a tightening by the Bank of Canada that is, and is not, a response to a tightening by the Federal Reserve System. In contrast, business loans increase following a monetary tightening. The 'perverse' response of business loans cannot be explained by an increase in the demand for funds due to a reduction in real activity. These results are consistent with a change in bank portfolio behaviour in favour of business loans in response to a monetary tightening.     

Do people gamble more in good times? Evidence from 27 European countries

We provide evidence of a positive relationship between the intensity of gambling and economic growth in 27 European countries for 2005–2013. Our proxy for gambling is represented by government revenues from taxes on lotteries, betting and gambling. This variable is linked to GDP growth in a panel regression framework and pooled OLS. However, when we split our sample to account for the heterogeneity among European countries, we found that the positive ‘gambling – GDP growth’ relationship is driven extensively by the Central and Eastern European countries. It appears that people in these countries tend to gamble more when the economy is expanding.