I study a search theoretic model with pairwise meetings where dealers arise endogenously. The extent of intermediation depends on its cost, trade frictions, and the dealers' ability to negociate favorable terms of trade. Under Nash bargaining, there is a unique equilibrium where dealers buy and...

We endogenize the trade mechanism in a search economy with many homogenous sellers and many heterogeneous buyers of unobservable type. We study how heterogeneity and the traders' continuation values -- which are endogenous -- influence the sellers' choice of trade mechanism. Sellers trade off...

We endogenize the trade mechanism in a search economy with many homogenous sellers and many heterogeneous buyers of unobservable type. We study how heterogeneity and the traders’ continuation values which are endogenous influence the sellers’ choice of trade mechanism. Sellers trade off the...

Conventional investigations of the "best" intermediate target variable for monetary policy have used a single criterion: the best fit between the behavior of an aggregate and that of some goal variable such as nominal spending or the aggregate price level. Ignored in this type of study, however,...

In the P-star model the price level is determined by the money stock per unit of potential output and the long-run equilibrium level of the velocity of money. This article applies this model to Austria. Problems in identifying permanent shocks to potential output and/or velocity lead to the...

This paper finds that standard asset pricing models fail to explain the significantly positive delta hedging errors from writing options on foreign exchange futures. Foreign exchange volatility does influence stock returns, however. The volatility of the JPY/USD exchange rate predicts the time...

This paper shows that incomplete information can be a rich source of sunspots equilibria. This is demonstrated in a standard dynamic general equilibrium model of monopolistic competition … la Dixit-Stiglitz. In the absence of fundamental shocks, the model has a unique certainty (fundamental)...

Price rigidity is the key mechanism for propagating business cycles in traditional Keynesian theory. Yet the New Keynesian literature has failed to show that sticky prices by themselves can effectively propagate business cycles in general equilibrium. We show that price rigidity in fact can (by...

This paper studies the effects of conflict onset on asset markets applying the event study methodology. We consider a sample of 112 conflicts during the period 1974-2004 and find that a sizeable fraction of them had a significant impact on stock market indices and on major commodity prices....

May 6, 2011. Presented at Arkansas Day with the Bank Commissioner, Little Rock, Ark.