The analysis of the Equity Risk Premium (ERP) and the research efforts aimed at solving the Equity Premium Puzzle (Mehra and Prescott 1985), are still widely discussed in the economic and financial literature. The purpose of this paper is to show that differences in the ERP between developed and...

We discuss how Whittle's (Whittle, 1990) approach to risk-sensitive optimal control problems can be applied in economics and finance. We show how his analysis of the class of Linear Exponential Quadratic Gaussian problems can be extended to accommodate time-discounting, while preserving its...

We investigate the effects of a credit crunch in an economy where firms can operate a mature technology or restructure their activity and adopt a new technology. We show that firms’ collateral and credit relationships ease firms’ access to credit and investment but can also inhibit firms’...

We estimate the effect of exchange rate movements on firm-level wages, using a representative panel of manufacturing firms. We show that the direction and size of wage adjustment is shaped by the international exposure of each firm on both the sale and cost side of the balance sheet, similar to...

The recent financial crisis has clearly shown that the relationship between bank internationalization and risk is complex. Multinational banks can benefit from portfolio diversification, reducing their overall riskiness, but this effect can be offset by incentives going in the opposite...

In a DSGE model with non-ricardian agents, a' la Blanchard-Yaari, stock-price fluctuations affect the dynamics of aggregate consumption through wealth effects. This wealth effects can be characterized as an additional dynamic distortion with respect to the social planner allocation, related to...

This paper examines the interactions between monetary policy and stability of interbank money markets. After showing some empirical evidence of a central bank's concern for money market stability I derive a forward smoothing interest rate rule moving from an explicit target in terms of a...

A ÞrmÕs decision of obeying environmental regulatory standards depends crucially on its chances of being detected and on the costs it must bear in case of detection. We investigate the relationship between the amount of resources devoted to environmental monitoring and the extent of...

What is the welfare loss arising from uncertainty about true policy targets? We quantify these effects in a DSGE model where private agents are unable to distinguish between temporary shocks to potential output and to the inßation target. Agents use optimal Þltering techniques to construct...