Related papers: Optimal Taxation with Endogenous Default under Inc…

This paper investigates risk measures derived from the expected maximum deficit in a continuous-time framework and develops optimal reserve allocation strategies across multiple lines of business. We formalize the expected maximum deficit…

We explore the interplay between sovereign debt default/renegotiation and environmental factors (e.g., pollution from land use, natural resource exploitation). Pollution contributes to the likelihood of natural disasters and influences…

We study the effects on economic activity of a pure temporary change in government debt and the relationship between the debt multiplier and the level of debt in an overlapping generations framework. The debt multiplier is positive but…

This paper develops a structural credit risk model to characterize the difference between the economic and recorded default times for a firm. Recorded default occurs when default is recorded in the legal system. The economic default time is…

This paper studies optimal consumption and saving decisions under uncertainty about the transition dynamics of the economic environment. We consider a general optimal savings problem in which the exogenous state governing discounting,…

Agents buy and sell services. All services are of equal quality. Buyers choose sellers at random. Monetary and fiscal policies are imposed by a central bank and a central government. Credit is supplied by a commercial banking system.…

We address the problem of maximizing Gain from Trade (GFT) in repeated buyer-seller exchanges subject to global budget balance constraints. While this problem is well-understood in purely adversarial and stochastic settings, these…

I study the optimal regulation of a financial sector where individual banks face self-enforcing constraints countering their default incentives. The constrained-efficient social planner can improve over the unregulated equilibrium in two…

The existing theorization of development economics and transition economics is probably inadequate and perhaps even flawed to accurately explain and analyze a dual economic system such as that in China. China is a country in the transition…

I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…

This paper extends the classical dividend problem by incorporating a novel, path-dependent mechanism of firm default. In the traditional framework, ruin occurs when the surplus process first reaches zero. In contrast, default in our model…

This study analyzes public debts and deficits between European countries. The statistical evidence here seems in general to reveal that sovereign debts and government deficits of countries within European Monetary Unification-in average-…

We consider the problem of reducing the carbon emissions of a set of firms over a finite horizon. A regulator dynamically allocates emission allowances to each firm. Firms face idiosyncratic as well as common economic shocks on emissions,…

How should taxes on externality-generating activities be adjusted if they are regressive? In our model, the government raises revenue using distortionary income and commodity taxes. If more or less productive people have identical tastes…

We consider the problem of optimal consumption from labor income and investment in a general incomplete semimartingale market. The economic agent cannot borrow against future income, so the total wealth is required to be positive at (all or…

We provide two methodological insights on \emph{ex ante} policy evaluation for macro models of economic development. First, we show that the problems of parameter instability and lack of behavioral constancy can be overcome by considering…

We study optimal taxation when citizens hold beliefs about an honest versus opportunistic government and update those beliefs from observed taxes and delivery. In a Ramsey economy with competitive firms, the government privately knows its…

In this paper, we study an optimal excess-of-loss reinsurance and investment problem for an insurer in defaultable market. The insurer can buy reinsurance and invest in the following securities: a bank account, a risky asset with stochastic…

A complete description of taxation systems that ensure sustainable economic development is given. These tax systems depend on production technologies and gross output volumes. Explicit formulas for such dependencies are found. In a…

We provide a stochastic analysis of an overlapping-generations model under incomplete markets. By casting individual optimisation with idiosyncratic income risk into a forward-backward stochastic differential equation (FBSDE) system, we (i)…