The most common approach for default dependence modelling is at present copula functions. Within this framework, the paper examines factor copulas, which are the industry standard, together with their latest development, namely the incorporation of sudden jumps to default instead of a pure...

When central banks announce cuts to future interest rates, the expected costs of government debt service decrease, generating additional resources in future budgets. This paper demonstrates that if the rational-expectations assumption is dropped, fiscal authority can exploit those gains by...

None of the known macroeconomic theories are adequate to understand what to do in a global crisis like the 2020 Global Pandemic. Rational Expectations and monetarism cannot even ex-plain how is that a global crisis like this happens. The IS-LM model was designed to manage business cycles, but...

How costly are the imperfections of conditional welfare programs? Should we replace these programs with a Universal Basic Income (UBI)? We answer these questions using a general equilibrium model with incomplete markets, accounting for three overlooked imperfections of real-life conditional...

Poverty is an irrevocable curse of our existing institutional structure and a grey area of existing economic theories. The micro-credit can support a mere semi-subsistence economic structure since its targets are those poor people who are dependent on borrowings for their subsistence. The...

This paper presents a model on the leverage of financial intermediaries, where debt are held by risk averse agents and equity by the risk neutral. The paper shows that in an unregulated competitive market, financial intermediaries choose to be leveraged over the social best level. This is...

When market structure is complete, factor demands by households will be independent of their characteristics, and households will take their production decisions as if they were profit-maximizing firms. This observation constitutes the basis for one of the most popular empirical tests for...