Related papers: Fiscal Stimulus of Last Resort
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
This paper investigates the emergence of wealth inequality through a minimalist kinetic exchange model that incorporates two fundamental economic features: fixed-amount transactions and hard budget constraints. In contrast to the maximum…
I model the belief formation and decision making processes of economic agents during a monetary policy regime change (an acceleration in the money supply) with a deep reinforcement learning algorithm in the AI literature. I show that when…
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a…
The current global financial system forms a highly interconnected network where a default in one of its nodes can propagate to many other nodes, causing a catastrophic avalanche effect. In this paper we consider the problem of reducing the…
In macroeconomics, an emerging discussion of alternative monetary systems addresses the dimensions of systemic risk in advanced financial systems. Monetary regime changes with the aim of achieving a more sustainable financial system have…
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.…
This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…
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…
We study soft budget constraints in multi-tier public finance when an upper-tier government uses two instruments: an ex-ante grant schedule and an ex-post rescue. Under convex rescue costs and standard primitives, the three-stage…
Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…
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…
International taxation rules are outdated, allowing multinationals to shift profits to tax havens. This paper examines how tax reforms affect profit shifting and cross-country welfare. We propose a model that separates real economic profits…
We extend in a minimal way the stylized model introduced in in "Tipping Points in Macroeconomic Agent Based Models" [JEDC 50, 29-61 (2015)], with the aim of investigating the role and efficacy of monetary policy of a `Central Bank' that…
This paper presents global tracking strategies for the attitude dynamics of a rigid body. It is well known that global attractivity is prohibited for continuous attitude control systems on the special orthogonal group. Such topological…
The Total Portfolio Approach and Strategic Asset Allocation are widely viewed as competing frameworks for institutional portfolio management. We argue they differ in a single governance parameter: the tracking error constraint. Using U.S.…
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.…
Encouraged by decision makers' appetite for future information on topics ranging from elections to pandemics, and enabled by the explosion of data and computational methods, model based forecasts have garnered increasing influence on a…
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…