Related papers: Shifting Policy Strategy in Keynesianism
Macroeconomic fluctuations and the narratives that shape them form a mutually reinforcing cycle: public discourse can spur behavioural changes leading to economic shifts, which then result in changes in the stories that propagate. We show…
How should central banks optimally aggregate sectoral inflation rates in the presence of imperfect labor mobility across sectors? We study this issue in a two-sector New-Keynesian model and show that a lower degree of sectoral labor…
Diversification is usually viewed as a reliable way to reduce risk, yet it can dramatically fail for heavy-tailed losses with infinite mean: pooling independent losses of this type may increase tail risk at every threshold. We study this…
We develop a theory of demand economics for an era of material abundance. The binding constraint on growth has shifted from insufficient aggregate demand to inadequate demand-tier upgrading. Our result is that, the new engine of growth lies…
During the Great Recession, Democrats in the United States argued that government spending could be utilized to "grease the wheels" of the economy in order to create wealth and to increase employment; Republicans, on the other hand,…
Although recent studies have shown that electricity systems with shares of wind and solar above 80% can be affordable, economists have raised concerns about market integration. Correlated generation from variable renewable sources depresses…
A public decision-making problem consists of a set of issues, each with multiple possible alternatives, and a set of competing agents, each with a preferred alternative for each issue. We study adaptations of market economies to this…
The 2008 global financial crisis marked the beginning of a decade dominated by fiscal austerity policies in much of the developed world. This paper presents a qualitative narrative review of an extensive collection of academic literature to…
Do governments adjust budgetary policy to rising public debt, precluding fiscal unsustainability? Using budget data for 52 industrial and emerging economies since 1990, we apply panel methods accounting for cross-sectional dependence and…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
Dynamic, risk-based pricing can systematically exclude vulnerable consumer groups from essential resources such as health insurance and consumer credit. We show that a regulator can realign private incentives with social objectives through…
Classic economic science is reaching the limits of its explanatory powers. Complexity science uses an increasingly larger set of different methods to analyze physical, biological, cultural, social, and economic factors, providing a broader…
We analyze the problem of optimal reduction of the debt-to-GDP ratio in a stochastic control setting. The debt-to-GDP dynamics are modeled through a stochastic differential equation in which fiscal policy simultaneously affects both debt…
We discovered that past changes in the market correlation structure are significantly related with future changes in the market volatility. By using correlation-based information filtering networks we device a new tool for forecasting the…
Since its inception, Bitcoin has been positioned as a revolutionary alternative to national currencies, attracting immense public and academic interest. This paper presents a critical evaluation of this claim, suggesting that Bitcoin faces…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
A policymaker often wants to steer a decision-maker toward one of two actions, but lacks reliable knowledge of how the decision-maker perceives uncertainty or evaluates risk. We formalize a notion of robust paternalism: a modification a' of…
We study the problem of a policymaker who aims at taming the spread of an epidemic while minimizing its associated social costs. The main feature of our model lies in the fact that the disease's transmission rate is a diffusive stochastic…
Securities markets are quintessential complex adaptive systems in which heterogeneous agents compete in an attempt to maximize returns. Species of trading agents are also subject to evolutionary pressure as entire classes of strategies…
Despite the importance of this variable in the macroeconomic context, current research on job insecurity remains mainly confined to its non-systemic dimension. The research aim of this paper is to identify the short-run and long-run…