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In our model, banks, heterogeneous in terms of entry costs, compete a la Salop for depositors on the unit circle. When capital requirements, intended to prevent risk shifting, are increased, the resulting costs are passed on to depositors in the form of reduced deposit rates or quality of service. This may induce depositors to migrate to unregulated shadow banks, the consequence being a change in the market structure for regulated banks: for low levels of capital requirements we observe monopolistic competition, while for higher levels constrained oligopoly and, finally, local monopoly. Under the latter two types of market structure, higher capital requirements reduce the profit margins and franchise values of banks, which may have the unintended effect of inducing banks to increase the riskiness of their investments.

Extending earlier work by Greenwald and Stiglitz (1993) on the role of a firm's equity position and bankruptcy costs in determining its production decision we show that, even if bankruptcy costs are ignored, a firm's decision makers' risk aversion, whether they are owner-entrepreneurs or hired managers, can give rise to the same results. What is more, we argue that, in the presence of risk aversion, increased variance of the output price affects a firm's supply decision as the sum of an impact and an indirect effect. Under reasonable assumptions the impact effect prevails and then output decreases. We show this to hold for risk attitudes represented both by CARA and by CRRA utility functions. Finally, we explore the dynamics of the equity base. We provide examples in which the accumulation of net worth slows down as a consequence of an increase of risk.

In a transparent and parsimonious moral hazard setting, various types of inefficiencies of deposit rate ceilings are identified. Welfare with ceilings may be lower than welfare without these and a more risky environment may render deposit rate ceilings impotent.

In this paper we use a non-tatonnement dynamic macroeconomic model to study the role of inventories, expectations and wages in the business cycle. Following a restrictive monetary shock, by amplifying spillover effects inventories may imply that the economy converges to a deflationary locally stable Keynesian underemployment state. The model is applied to evaluate economic policies like quantitative easing as well as the effectiveness of holding inflationary expectations to recover to full employment. If inflationary expectations are not sufficient, imposing downward rigidity of nominal wages helps to exit from the recession.

Economic theory does not provide a solution to the monopolist's price setting problem when the demand curve faced is isoelastic with elasticity smaller than or equal to one. In the present paper it is argued that this is no longer true when uncertainty about demand and risk aversion of the monopolist are admitted. In particular it is shown that a monopolist with constant relative risk aversion r facing an expected demand curve with constant elasticity ɛ may be seen as behaving like a standard monopolist facing a demand curve having elasticity (1+r)ɛ.

The New Keynesian model of monopolistic competition by Blanchard and Kiyotaki (1987) is reformulated according to an objective demand approach making the behavior of all agents fully rational. The revised model is compared with the original model in terms of prices, quantities and welfare. Working with the revised model enhances the validity of the menu-cost argument and, different from the original model, implies that price rigidity is increasing in market concentration.

In a dynamic non-tâtonnement macroeconomic model, trades take place in each period even when prices are not Walrasian. Prices are adjusted between trading periods according to the intensity of disequilibrium, a reliable measure of which is obtained by means of stochastic rationing. The degree of downward nominal wage stickiness as well as government policy parameters are decisive for the dynamics that emerge. In particular, it is possible for the economy to converge to quasi-stationary states involving permanent unemployment and decreasing nominal wages or to produce complex business cycles with structural features recurrent over time but varying and unpredictable shape and size.

This chapter reviews the theory with stochastic rationing and outlines the agenda for further research.

Può essere ottimale per un'impresa avversa al rischio non cambiare il suo prezzo anche se fosse ottimale cambiarlo qualora l'impresa fosse neutrale al rischio. Un prezzo che possieda questa proprietà è chiamato un prezzo fisso endogeno. Esistono prezzi fissi endogeni se, e solo se, la varianza della quantità domandata, vista come variabile aleatoria da parte dell'impresa, presenta uno spigolo in corrispondenza al prezzo di status quo.

This paper studies the existence and stability of non-Walrasian equilibria in a labour-managed economy. The main finding is that non-Walrasian equilibria exist and constitute a one-dimensional smooth manifold; they are stable but not asymptotically stable.