Money Illusion and Housing Frenzies
A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example, investors who decide whether to rent or...
Monetary policy and its informative value
This paper analyzes the welfare effects of economic transparency in the conduct of monetary policy. We propose a model of monopolistic competition...
The optimal design of funded pensions
In many countries, pension funds based on individual accounts have been affected by high operating costs. Contract theory helps to unravel the nature...
Long-term care insurance, annuities and asymmetric information: the case for bundling contracts
Within an asymmetric information set-up in which individuals differ in terms of their risk aversion and can choose whether or not to take preventative...
Choice of corporate risk management tools under moral hazard
This paper examines the choice of tools for managing a firm’s operational risks: cash reserves, insurance contracts, and financial assets under an...
Regionality Revisited: an examination of the direction of spread of currency crises
What determines the direction of spread of currency crises? We examine data on waves of currency crises in 1992, 1994, 1997, and 1998 to evaluate...
Speculative attacks with multiple sources of public information
We propose a speculative attack model in which agents receive multiple public signals. It is characterised by its focus on an informational structure...
Consistent measures of risk
In this paper we compare overall as well as downside risk mea- sures with respect to the criteria of first and second order stochastic dominance...
Incentive design under loss aversion
Compensation schemes often reward success but do not penalize failure. Fixed salaries with stock options or bonuses have this feature. Yet the...
Equilibrium asset pricing with systemic risk
We provide an equilibrium multi-asset pricing model with micro-founded systemic risk and heterogeneous investors. Systemic risk arises due to...
Hedge funds and financial stability: explaining the debate at the financial stability forum
The regulatory story of hedge funds is a remarkable one, especially for an investment class born to remain outside any regulatory oversight.
Compensating wage differentials for defined benefit and defined contribution occupational pension scheme benefits
The theory of equalizing differences suggests that employer provided pension benefits should be compensated by reduced wage benefits for an employee’s...
The dark side of 'good' corporate governance: compliance-fuelled book-cooking activities
We argue on theoretical grounds that obligatory compliance with stricter financial reporting rules (e.g., the US Sarbanes-Oxley Act) may entail...
Consistent information multivariate density optimizing methodology
The estimation of the profit and loss distribution of a loan portfolio requires the modelling of the portfolio’s multivariate distribution. This...
Conditional probability of default methodology
This paper presents the Conditional Probability of Default (CoPoD) methodology for modelling the probabilities of loan defaults (PoDs) by small and...
Rent extraction by large shareholders: evidence using dividend policy in the Czech Republic
Using cross-sectional analysis of corporate dividend policy we show that large shareholders extract rents from firms and expropriate minority...
