The real exchange rate (RER) misalignment is a key variable in academic and policy circles. Among policy circles, sustained RER overvaluations are observed by authorities for future exchange rate adjustments. Some countries, on the other hand, have pursued very active exchange rate policies in order to undervalue their currencies to foster growth through export promotion (e.g. China). Our goal ...

The purpose of this paper is to present two examples of an economy possessing an optimum but no competitive equilibrium. Their essential features are having production and preferences over an infinite horizon; in fact, it seems similar examples may not occur in overlapping generations and/or pure exchange models. There is a growing literature of equilibrium existence theorems in this field. We ...

Increasing income and wealth inequality has led to renewed interest in understanding and explaining wealth and income distributions, and in particular the recent growth in their top shares (Piketty, 2014). The literature has largely emphasized the role of earnings inequality in explaining wealth inequality. Indeed, Bewley-Aiyagari economies, which focus on precautionary savings as an optimal re...

This paper considers a general equilibrium model in which the distinction between uncertainty and risk is formalized by assuming agents have incomplete preferences over statecontingent consumption bundles, as in Bewley (1986). Without completeness, individual decision making depends on a set of probability distributions over the state space. A bundle is preferred to another if and only if it ha...

An important implication of the expected utility model under risk aversion is that if agents have the same probability belief, then the efficient allocations under uncertainty are comonotone with the aggregate endowment, and if their beliefs are concordant, then the efficient allocations are measurable with respect to the aggregate endowment. We study these two properties of efficient allocatio...

We consider mechanism design problems in which agents perceive Knightian uncertainty. Uncertainty is formalized using incomplete preferences, as in Bewley (1986). Without completeness, individual decision making depends on a set of beliefs, and an action is preferred to another if and only if it has larger expected utility for all beliefs in this set. We consider two natural notions of incentiv...

Concerns of pride, dignity and the desire to “keep hope” about future options often lead individuals and groups to walk away from reasonable offers, try to shift blame for failure onto others or take refuge in political utopias, leading to impasses and conflicts. Examples include trials, divorces, strikes, the scapegoating of minorities for economic hardships, and war. A key and puzzling aspect...

Childbirth is a highly emotive event that can involve complications. Around 1% of births in the United Kingdom involve life-threatening complications to the mother (Waterstone, Bewley, & Wolfe, 2001) and 0.8% result in stillbirth or perinatal death (Confidential Enquiry into Maternal and Child Health [CEMACH], 2009). A review found that 3.1% of women report posttraumatic stress disorder (PTSD) ...