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Despite decades of climate policy and rapid improvements in energy efficiency, global CO2 emissions continue to rise, suggesting the presence of structural drivers that offset efficiency gains. Here we identify financial leverage as a key…
An unconventional approach for optimal stopping under model ambiguity is introduced. Besides ambiguity itself, we take into account how ambiguity-averse an agent is. This inclusion of ambiguity attitude, via an $\alpha$-maxmin nonlinear…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Standard optimal growth models implicitly impose a ``perpetual existence'' constraint, which can ethically justify infinite misery in stagnant economies. This paper investigates the optimal longevity of a dynasty within a Critical-Level…
We study the optimal execution of market and limit orders with permanent and temporary price impacts as well as uncertainty in the filling of limit orders. Our continuous-time model incorporates a trade speed limiter and a trader director…
With negative growth in real production in many countries and debt levels which become an increasing burden on developed societies, the calls for a change in economic policy and even the monetary system become louder and increasingly…
We demonstrate by mathematical analysis and systematic computer simulations that redistribution can lead to sustainable growth in a society. The human capital dynamics of each agent is described by a stochastic multiplicative process which,…
We investigate state-dependent effects of fiscal multipliers and allow for endogenous sample splitting to determine whether the US economy is in a slack state. When the endogenized slack state is estimated as the period of the unemployment…
We introduce a dynamic and stochastic interbank model with an endogenous notion of distress contagion, arising from rational worries about future defaults and ensuing losses. This entails a mark-to-market valuation adjustment for interbank…
I sketch a program for a microeconomic theory of the main component of the business cycle as a recurring disequilibrium, driven by incompleteness of the financial market and by information asymmetries between borrowers and lenders. This…
This paper studies the optimal extraction policy of an oil field as well as the efficient taxation of the revenues generated. Taking into account the fact that the oil price in worldwide commodity markets fluctuates randomly following…
I develop a dynamic model of how internal capital markets in conglomerates respond to liquidity shocks when affiliated firms vary in innovation potential. A two-stage framework defines cutoff rules for when the conglomerate should liquidate…
The scale and terms of aggregate borrowing in an economy depend on the manner in which wealth is distributed across potential creditors with heterogeneous beliefs about the future. This distribution evolves over time as uncertainty is…
We introduce a prototype agent-based model of the macroeconomy, with budgetary constraints at its core. The model is related to a class of constraint satisfaction problems (CSPs), which has been thoroughly investigated in computer science.…
Why do societies remain stuck in inferior institutions even when superior al ternatives are widely recognized? This paper develops a model in which agents choose not only actions within a game but also transformations of the game it self.…
I devise a novel approach to evaluate the effectiveness of fiscal policy in the short run with multi-category treatment effects and inverse probability weighting based on the potential outcome framework. This study's main contribution to…
Japan's population is shrinking, the share of working-age people is falling, and the number of elderly is growing fast. These trends squeeze public finances from both sides--fewer people paying taxes and more people drawing on pensions and…
We present a general equilibrium macro-finance model with a positive feedback loop between capital investment and land price. As leverage is relaxed beyond a critical value, through the financial accelerator, a phase transition occurs from…
We study a large economy in which firms cannot compute exact solutions to the non-linear equations that characterize the equilibrium price at which they can sell future output. Instead, firms use polynomial expansions to approximate prices.…
We consider a frictionless constant endowment economy based on Leeper (1991). In this economy, it is shown that, under an ad-hoc monetary rule and an ad-hoc fiscal rule, there are two equilibria. One has active monetary policy and passive…