We explore voluntary participation in pension arrangements. Individuals only participate when participation is more attractive than autarky. The benefit of participation is that risks can be shared with future generations. We apply our analysis to a pay-as-you-go system, a funded system without...

We develop a dynamic model of liquidity provision, in which hedgers can trade multiple risky assets with arbitrageurs. We compute the equilibrium in closed form when arbitrageurs' utility over consumption is logarithmic or risk-neutral with a non-negativity constraint. Liquidity is increasing in...

This paper uses stochastic simulations on calibrated models to assess the optimal degree of reliance on funded pensions and on a particular type of unfunded (PAYG) pension. Surprisingly little is known about the optimal split between funded and unfunded systems when there are sources of...

We analyse risk-sharing and endogenous fiscal spending in a two-region model with sequentially complete markets. Fiscal policy is determined by majority voting. When policy setting is decentralized, regions choose pro-cyclical fiscal spending in an attempt to manipulate security prices to their...

While the "risk amelioration" literature suggests that risk sharing channels savings into risky but productive technologies and hence favours growth, models focused on precautionary savings reverse this conclusion. We solve, by means of numerical techniques, a model based on human capital...

This Paper uses stochastic simulations on calibrated models to assess the steady state impact of different pension arrangements in an environment where financial markets are less than perfect. Surprisingly little is known about the optimal split between funded and unfunded systems when there are...

Price discrepancies, although at odds with mainstream finance, are persistent phenomena in financial markets. These apparent mispricings lead to the presence of ‘arbitrageurs’, who aim to exploit the resulting profit opportunities, but whose role remains controversial. This article...

How much of China’s recent economic performance can be attributed to market-oriented reforms introduced in the last two decades? A long-run perspective may be important for understanding the process of economic development occurring today. This Paper compares the integration of rice markets in...

We study the effect of introducing a new security, such as a non-redundant derivative, on the volatility of stock-market returns. Our analysis uses a standard, continuous time, dynamic, general-equilibrium, full-information, frictionless, Lucas endowment economy where there are two classes of...

We analyse a model in which bank deposits are insured and there is an exogenous cost of bank capital. The former effect results in bank over-investment and the latter in under-investment. Regulatory capital requirements introduce investment distortions, which are a constrained optimal response...