This paper investigates the implications of cross-country heterogeneity within the euro area for the design of optimal monetary policy. We build an optimizing-based multi-country model (MCM) describing the euro area in which dicurren;erences between structural parameters across countries are...

We quantify the effects of financial regulation in a general equilibrium model with market microstructure. Fund managers trade stocks and bonds in an order-driven market, subject to transaction taxes and constraints on short-selling and leverage. Results are obtained on the equilibrium...

The majority of academic economists share the view that a corporation should serve the exclusive interests of its shareholders (shareholder value maximization). This view is fi rmly grounded on the extension, by Arrow (1953) and Debreu (1959) of the two welfare theorems to production economies...

Static and dynamic games are important tools for the analysis of strategic interactions among economic agents and have found many applications in economics. In many games equilibria can be described as solutions of polynomial equations. In this paper we describe state-of-the-art techniques for...

The paper first shows that financial market equilibria need not to exist if agents possess cumulative prospect theory preferences with piecewise-power value functions. This is due to the boundary behavior of the cumulative prospect theory value function, which might cause an infinite...

We study the dynamic general equilibrium of an economy where risk averse shareholders delegate the management of the firm to risk averse managers. The optimal contract has two main components: an incentive component corresponding to a non-tradable equity position and a variable 'salary'...