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The Kiyotaki and Wright model has exerted a considerable influence on the monetary search literature. We argue that the model also delivers important insights into a broader range of macroeconomic and development issues. The analysis studies how market frictions and the liquidity of assets affect the distribution of income. Experiments illustrate how the economy adjusts to shocks to asset returns and to the matching technology. They also deal with long-run transition. An experiment interprets the reversal of fortune hypothesis as a situation in which an economy with a low-return asset takes over a similar economy with a high-return asset. (JEL C61, C63, E41, E27, D63), I. INTRODUCTION Most of the dynamic general equilibrium theory is based on the idea that individuals trade goods and services in centralized markets. The assumption that agents trade against a [...]

I study a model of strategic disclosure of a private signal to a rival in the presence of a payoff externality. In the model, two agents forecast the unknown true state of a future period. Specifically, the quality of the signal is also private information. Hence, which quality of signal is revealed for which incentive is the main question of interest. I show that, even when disclosure is costly, the revealing equilibrium, where an agent voluntarily reveals his signal, can exist and it should be a monotone equilibrium. Asymmetry between the penalty for an incorrect forecast and the reward for a correct forecast is a necessary condition for the existence of this revealing equilibrium. If the penalty is larger than the reward, the unique revealing equilibrium is a separating equilibrium, where only the low quality signed is disclosed in order to induce the rival's imitation. On the other hand, if the reward is much larger than the penalty, the unique revealing equilibrium is a pooling equilibrium, where the signal is always revealed in order to induce the rival's deviation. If the reward is not much larger than the penalty, no revealing equilibrium is robust to a costly disclosure. (JEL D81, D82), I. INTRODUCTION It is common for agents or firms in the competitive environment to disclose private information to competitors. For example, rating agencies such as Standard & Poor's, Moody's, and [...]

Abstract The intertemporal equilibrium approach to current accounts analyzed the impacts of respective intra-European Monetary Union (intra-EMU) and Asian-U.S. financial integration between 1999 and 2007 on the intra-EMU current account [...]

We study a class of games with a continuum of players for which a Cournot-Nash equilibria can be obtained by the minimisation of some cost related to optimal transport. This [...]

Coleman and Grimes (2010) discusses the likely effects of both land and property taxes. Their paper provides a partial equilibrium analysis, which ignores personal taxes, and it reports results for a more complex general equilibrium analysis in which personal taxes are included. Their general equilibrium analysis is not easily accessible to the general reader. In this paper I provide an extension to the partial equilibrium model of Coleman and Grimes to allow for personal taxes and use this to estimate the effects on land prices of changes in different tax rates. Keywords: land tax; property values, 1. Introduction Coleman and Grimes (2010), which appears earlier in this issue, presents a very clear and helpful analysis of the likely effects of both land and property taxes. They [...]

A study was conducted to investigate the effect of infrequent portfolio decisions in a simple two-country general equilibrium model. The model can account for the forward discount puzzle as well as several related empirical phenomena. Information about infrequent portfolio decisions is also provided.

An equilibrium term structure model with recursive preferences for pricing bonds is presented. The model preserves the recursive preferences and risk neutral, but relaxes the assumption that the price/consumption ratio be linear in the state. The model enables a nonaffine structure to historical distribution to arise directly as a result of state dependent market prices of risks.

An equilibrium model that can account for quantitatively challenging facts of international finance is presented. The model explains the volatility of exchange rate and stochastic discount factors, the volatility of net exports, and the amount of cross-country correlation and persistence of growth rates. The welfare effects of financial integration are estimated using the model.

This paper proposes a model to compute nodal prices in oligopolistic markets. The model generalizes a previous model aimed at solving the single-bus problem by applying an optimization procedure. Both models can be classified as conjectured supply function models. The conjectured supply functions are assumed to be linear with constant slopes. The conjectured price responses (price sensitivity as seen for each generating unit), however, are assumed to be dependent on the system line's status (congested or not congested). The consideration of such a dependence is one of the main contributions of this paper. Market equilibrium is defined in this framework. A procedure based on solving an optimization problem is proposed. It only requires convexity of cost functions. Existence of equilibrium, however, is not guaranteed in this multi-nodal situation and an iterative search is required to find it if it exists. A two-area multi-period case study is analysed. The model reaches equilibrium for some cases, mainly depending on the number of periods considered and on the value of conjectured supply function slopes. Some oscillation patterns are observed that can be interpreted as quasi-equilibria. This methodology can be applied to the study of the future Iberian electricity market. doi:10.1057/jors.2008.118 Keywords: OR in energy; electricity markets; network constraints

No-arbitrage models are extremely flexible modelling tools but often lack economic motivation. This paper describes an equilibrium consumption-based CAPM framework based on Epstein-Zin preferences, which produces analytic pricing formulas for stocks and bonds under the assumption that macro growth rates follow affine processes. This allows the construction of equilibrium pricing formulas while maintaining the same flexibility of state dynamics as in no-arbitrage models. In demonstrating the approach, the paper presents a model that incorporates inflation such that asset prices are nominal. The model takes advantage of the possibility of non-Gaussian shocks and model macroeconomic uncertainty as a jump-diffusion process. This leads to endogenous stock market crashes as stock prices drop to reflect a higher expected rate of return in response to sudden increases in risk. The nominal yield curve in this model has a positive slope if expected inflation growth negatively impacts real growth. This model also produces asset prices that are consistent with observed data, including a substantial equity premium at moderate levels of risk aversion. Key words: finance; investment; asset pricing; probability; diffusion; stochastic model applications History: Accepted by David A. Hsieh, finance; received August 14, 2006. This paper was with the author 5 months for 2 revisions. Published online in Articles in Advance September 11, 2008., 1. Introduction Traditional models of financial market equilibrium, such as the Sharpe-Linter-Mossin CAPM and Lucas' consumption C-CAPM, are well known to fail in explaining essential stylized facts of asset market [...]

This paper describes a dynamic, general equilibrium model designed to gauge the importance of contractual imperfections in the form of limited enforcement for international differences in the organization of production. In the model, limited enforcement constrains agents to operate establishments below their optimal scale. As a result, economies where contracts are enforced more efficiently tend to be richer and emphasize large scale production. Calibrated simulations of the model reveal that these effects can be large and account for a sizeable part of the observed differences in the size distribution of manufacturing establishments between the United States, Mexico and Argentina. JEL classification: L23; O11 Keywords: Limited enforcement; Organization of production; Economic development

Increases in U.S. current account deficits and assets in global portfolios and decline in interest rates as results of different capacities of world regions in generating assets from real investments is analyzed. The model used also shows excess returns from exchange rate and foreign direct investment. Global equilibrium scenarios are presented.

With globalization and rising competition, alliances became the strategic option of choice. Companies are increasingly required to be attractive partners by meeting performance prerequisites. We develop a game theory model in a duopoly environment to demonstrate the advantages of privatization in improving the firm's performance. We derive the model mathematically then apply it to a real life situation from the automotive industry. We show that the privatized firm performs better than its public counterpart and is suited for private sector allies. Renault's success is not due to its late 1990s tactics, as several analysts argue, but to strategic moves over decades transcending fluctuations in the European economy. Keywords: automotive, competition, game theory, partial equilibrium, privatization

We propose a general equilibrium model where the economic organization of agriculture and the political equilibrium determining the security of property rights are jointly determined. In particular, because the form of organization may affect the probability and distribution of benefits from future property challenges, it may be shaped in anticipation of this impact. Property rights security may then be secured at the expense of economic efficiency. The model provides a framework for understanding why in some contexts land is redistributed primarily via land sales and tenancy markets but via politics and conflict in others. We test some implications of the theory using a five-decade panel dataset that traces changes in the extent of tenancy and tenancy reform across 15 Indian states. JEL classification: Q15; O12; N50; D72 Keywords: Agrarian organization; Tenancy; Political economy; Squatters; Agrarian reform

This paper examines how much of the difference in the size of the informal sector and in per capita income across countries can be accounted by regulation costs and enforcement of financial contracts. It constructs and solves numerically a general equilibrium model with credit constrained heterogenous agents, occupational choices over formal and informal businesses, financial frictions and a government sector which imposes taxes and regulations on formal firms. The benefit from formalization is better access to outside finance. The quantitative exercises suggest that: (i) regulation costs and not the level of enforcement account for differences in the size of the informal sector between United States and Mediterranean Europe; (ii) for a developing country like Peru, however, contract enforcement and regulation costs are equally important in accounting for the size of the informal sector; and (iii) regulation costs and contract enforcement do not account for most of the income differences observed among countries. JEL classification: E6; O11; O17 Keywords: Inequality; Credit constraints; Regulation and corruption; Informal sector

The effects and macroeconomic significance of both Jobs and Growth Tax Relief Reconciliation Act of 2003 and Economic Growth and Tax Relief Reconciliation Act of 2001 are discussed by clarifying the trends of tax rates on capital income and labor.

An equilibrium model to explain demand uncertainty and distribution of capacity utilization rates of firms is discussed.

Usage of an equilibrium model to find out relationship between executive compensation and manager's performance and misreporting is presented.

The robustness of standard continuous-time core-periphery model, an economic equilibrium model, is evaluated.

A study is conducted to analyze general equilibrium model to better understand the uncertainty and volatility of investment risk.

An alternative to Post Keynesians equilibrium model to analyze how households manage their flow of savings is presented.

A dynamic equilibrium model for analyzing child maltreatment and the influence of parent-child relations on these scenarios is presented.

Effect of dynamic contracts on asymmetric information is studied with the use of a general equilibrium model.

Inflation targeting issues of Central bank in a price fluctuating two-sector equilibrium model are examined. Implications of inflation targeting on equilibrium are analyzed. Relevance of a modified Taylor principle in this model is also investigated.

A vector equilibrium correction model is applied to monthly data from Croatia between 1994 and 2002 for estimating money demand. Findings may be used for inflation rate forecasting.

A general equilibrium model analyzing firm's initial ownership and stock market performance under moral hazard is presented.

Prevalence of a market conditions path combining prices and quantities in a general equilibrium model is examined. Path is assessed using a simplicial algorithm.

An equilibrium model is used to analyze impact of crime control parameters on criminal behavior .

A key element missing from the structural gravity literature is an examination of the implied general equilibrium. By design the gravity equation is adept at predicting bilateral trade flows. To make inferences beyond trade flows, however, the theoretic models should be consistent with other observables. Structural econometric estimates from Anderson and van Wincoop (2003) allow us to evaluate their proposed general equilibrium along several dimensions. We find that their gravity model predicts too large a difference between consumer and producer prices; excessive variation in the geographic distribution of consumer price indices; and an exceptionally large portion of output devoted to overcoming trade frictions. Under plausible parameterizations of the model at least 50% of output 'melts' in transit. JEL classification: F10

The interaction between authors and editors is used to illustrate an equilibrium model of journal quality. Clarifications are presented for conditions under which quality responds to the impatience of authors and editors.

Asset prices demonstrated different reaction patterns in this analysis, which used a rational expectation setup. These findings were critically dependent on housing services demand elasticity. Results are compared with relevant empirical data.

Byline: Bjarne S. Jensen (1), Mogens E. Larsen (2) Keywords: pareto effiency; walrasian equilibria; factor accumulation; F11; F43; O40; O41 Abstract: This paper analyzes Walrasian general equilibrium systems and calculates the static and dynamic solutions for competitive market equilibria. The Walrasian framework encompasses the basic multi-sector growth (MSG) models with neoclassical production technologies inN sectors (industries). The endogenous behavior of all the relative prices are analyzed in detail, as are sectorial allocations of the primary factors, labor and capital. Dynamic systems of Walrasian multi-sector economies and the family of solutions (time paths) for steady-state and persistent growth per capita are parametrically characterized. The technology parameters of the capital good industry are decisive for obtaining long-run per capita growth in closed (global) economies. Brief comments are offered on the MSG literature, together with apects on the studies of industrial (structural) evolution and economic history. Author Affiliation: (1) Department of Economics, Copenhagen Business School, Solbjerg Plads 3, 2000, Frederiksberg, Denmark (2) Department of Mathematics, Institute for Mathematical Sciences, Universitetsparken 5, 2100, Copenhagen, Denmark Article History: Registration Date: 06/07/2009 Received Date: 15/04/2003

A vertical product differentiation model was used to analyze duopoly equilibrium and social welfare optimum under partial market coverage when quality provision convex costs are either variable or fixed with regard to production. Results and interrelationships are discussed.

Findings show that growth model transitional dynamics with redistributive policies foster growth-maximizing results, as conflict over distribution diminishes over the time of development. This suggests that democracy increases consensus over policy options.

In this paper we show that measures of economic uncertainty (conditional volatility of consumption) predict and are predicted by valuation ratios at long horizons. Further we document that asset valuations drop as economic uncertainty rises--that is, financial markets dislike economic uncertainty. Moreover, future earnings growth rates are sharply predicted by current price-earnings ratios. It seems that much of the variation in asset prices can be attributed to fluctuations in economic uncertainty and expected cash-flow growth. This empirical evidence is consistent with the implications of existing parametric general equilibrium models. Hence, the channels of fluctuating economic uncertainty and expected growth seem important for interpreting asset markets. JEL Classification: G12 Keywords: Asset prices; Economic uncertainty; Growth rates

We construct a dynamic equilibrium model with contingent service and adverse selection to quantitatively study sovereign debt. In the model, benefits of defaulting are tempered by higher future interest rates. For a wide set of parameters, the only equilibrium is one in which the sovereign defaults in all states; additional output losses, however, sustain equilibria that resemble the data. We show that due to the adverse selection problem, some countries choose to delay default to reduce loss of reputation. Moreover, although equilibria with no default imply greater welfare levels, they are not sustainable in highly indebted and volatile countries. Keywords: Sovereign debt; Default; Contingent claims; Sustainability; Volatility JEL classification: F340; H630

The study conducted provides sufficient conditions for the integral of a correspondence defined on a measure space with atoms to exhibit star-shaped values. The results of the study is used to analyze the existence of a Nash equilibrium in games with a measure space of agents with atoms and of a competitive equilibrium in economies with mixed markets.

The study characterizes equilibria of games with two properties, firstly the agents have the opportunity to adjust their strategic variable after their initial choices and before payoffs occur; and secondly they can only add to their initial amounts. This equilibrium set consists of just the Cournot-Nash outcome, one or both Stackberg outcomes, or a continuum of points including the Cournot-Nash outcome and one or both Stakelberg outcomes.

The study presents Cournot convergence in a system of contingent-claims markets with moral hazard. The other agents condition their expectations on market prices, as in models of rational-expectations equilibrium with asymmetric information.

The study introduces optimal termination in dynamic contracts. It notifies the standard dynamic agency model to include an external labor market, which, upon the dissolution of the contract, allows the firm to return to the labor market to seek a new match.

The study develops a method that transforms an equilibrium strategy profile from one auction to another, which is constructive and does not require complicated computation. It explores an intuitive approach to the Revenue Equivalence Theorem, which is then generalized to establish revenue equivalence results in environments where these results cannot be easily established using standard techniques.

The study presents a simple geometric proof for the continuous-time process, and also extend the result to discrete-time fictitious play. Every discrete-time fictitious play process approaches equilibrium in nondegenerate 2x2 games, and that every continuous-time fictitious play process approaches equilibrium in nondegenerate 2x2 and 2x3 games.

This article develops and estimates a dynamic general equilibrium overlapping-generations model of career decisions. The model is fit to data on life cycle employment, schooling, and occupation decisions and on life cycle labor earnings, within and between cohorts observed in the United States between 1968 and 1993. Based on the estimates of the model, the impact of cohort size on skill prices and the general equilibrium effect of a tuition subsidy are assessed.

This article presents a tractable dynamic general equilibrium model explaining cross-country data on geographical mobility, unemployment, and labor market institutions. Rational forward-looking agents vote on unemployment insurance (UI). Agents with higher moving costs (larger attachment to their location) prefer more generous UI. Attachment is assumed to increase with the duration of residence. UI mitigates incentives liar moving and increases, therefore, the fraction of attached agents and the political support for UI. This self-reinforcing mechanism can yield two steady-states: one 'European' and one 'American.' The former (latter) features high (low) unemployment, low (high) geographical mobility, and high (low) UI.

Irving Fisher's Ph.D. thesis, submitted to Yale University in 1891, contains a fully articulated general equilibrium model presented with the broad scope and formal mathematical clarity associated with Walras and his successors. In addition, Fisher presents a remarkable hydraulic apparatus for calculating equilibrium prices and the resulting distribution of society's endowments among the agents in the economy. In this paper we provide an analytical description of Fisher's apparatus, and report the results of simulating the mechanical/hydraulic 'machine,' illustrating the ability of the apparatus to 'compute' equilibrium prices and also to find multiple equilibria.

The equilibrium dynamics of an AK-type endogenous model with vintage capital is analyzed. Further to characterize the optimal solutions of the model the study developed analytical and numerical methods that should be interest for the general resolution of endogenous growth models with vintage capital.

We study the determinants of the location of subcontracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends inter alia on the thickness of the domestic and foreign market for input suppliers, the relative cost of searching in each market, the relative cost of customizing inputs and the nature of the contracting environment ill each country. 'Subcontracting as many non-core activities as possible is a central element of the new economy'. Financial Times, 31 July 2001, p. 10.