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Since McCallum (1987), it is well known that in an overlapping generations (OLG) economy with land, the equilibrium is Pareto efficient because with balanced growth, the interest rate exceeds the economic growth rate ($R>G$), which rules…
Dynamic decisions are pivotal to economic policy making. We show how existing evidence from randomized control trials can be utilized to guide personalized decisions in challenging dynamic environments with budget and capacity constraints.…
We prove existence and uniqueness of stochastic equilibria in a class of incomplete continuous-time financial environments where the market participants are exponential utility maximizers with heterogeneous risk-aversion coefficients and…
We solve an expected utility-maximization problem with a Value-at-risk constraint on the terminal portfolio value in an incomplete financial market due to stochastic volatility. To derive the optimal investment strategy, we use the dynamic…
For an infinite-horizon continuous-time optimal stopping problem under non-exponential discounting, we look for an optimal equilibrium, which generates larger values than any other equilibrium does on the entire state space. When the…
We study the problem of a profit maximizing electricity producer who has to pay carbon taxes and who decides on investments into technologies for the abatement of carbon emissions in an environment where carbon tax policy is random and…
I develop and estimate a dynamic equilibrium model of risky entrepreneurs' borrowing and savings decisions incorporating both formal and local-informal credit markets. Households have access to an exogenous formal credit market and to an…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
We analyze how interdependencies between organizations in financial networks can lead to multiple possible equilibrium outcomes. A multiplicity arises if and only if there exists a certain type of dependency cycle in the network that allows…
Previous studies show that natural disasters decelerate economic growth, and more so in countries with lower financial development. We confirm these results with more recent data. We are the first to show that fiscal stability reduces the…
This paper explores the interplay between transfer policies, R\&D, corruption, and economic development using a general equilibrium model with heterogeneous agents and a government. The government collects taxes, redistributes fiscal…
This paper introduces a novel framework for designing fair and sustainable unemployment benefits, grounded in cooperative game theory and real-time fiscal policy. The labor market is modeled as a coalitional game, where a random subset of…
This paper studies a discrete-time version of the Lucas-Uzawa endogenous growth model with physical and human capital in the presence of externalities. Existence of an optimal equilibrium is proved using tools from dynamic programming with…
The efficient market hypothesis (EMH), based on rational expectations and market equilibrium, is the dominant perspective for modelling economic markets. However, the most notable critique of the EMH is the inability to model periods of…
This paper explores the mechanisms behind extreme financial events, specifically market crashes, by employing the theoretical framework of phase transitions. We focus on endogenous crashes, driven by internal market dynamics, and model…
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…
This paper considers the problem of optimal liquidation of a position in a risky security in a financial market, where price evolution are risky and trades have an impact on price as well as uncertainty in the filling orders. The problem is…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…
Street-level bureaucrats, such as caseworkers and border guards routinely face the dilemma of whether to follow rigid policy or exercise discretion based on professional judgement. However, frequent overrides threaten consistency and…
Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is…