We provide a necessary and a sufficient condition on an individual’s expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual’s demand for options and portfolio insurance. JEL Classification Codes: D51, D58, D81, G11, G12, G13.

In interim economies with asymmetric information, we show that the coarse core of Wilson (1978) does not converge to price equilibrium allocations as the economy is replicated. This failure of core convergence is a basic consequence of asymmetric information and extends to any reasonable notion of either (interim) core or price equilibrium. JEL Classification: C71, D51

Structural vector autoregressive (SVAR) models have emerged as a dominant research strategy in empirical macroeconomics, but suffer from the large number of parameters employed and the resulting estimation uncertainty associated with their impulse responses. In this paper we propose general-to-specific model selection procedures to overcome these limitations. After showing that single-equation ...

We investigate the connection between equilibrium existence and its attainability through simple market mechanisms in exchange economies with indivisibilities and complementarities. The analysis suggests that attaining efficient outcomes through simple non-combinatorial auctions may be problematic even when market clearing prices exist. JEL classification code: C62, D44, D51

We study the ex ante incentive compatible core, and provide conditions under which the ex ante incentive compatible core is nonempty when agents are informationally small in the sense of McLean and Postlewaite (2002a, Econometrica, 70, 2421–2453).  2003 Elsevier Inc. All rights reserved. JEL classification: C71; D51; D82

Competitive equilibria are shown to exist in two-object exchange economies with indivisibilities and additive complementarities in agent valuations between objects, provided that complementarities are common across agents. We further investigate whether the competitive equilibrium can be obtained as an outcome of a simultaneous English-type auction mechanism under non-strategic (honest) bidding...

The purpose of this paper is to evaluate the recent developments in the theory and practice of monetary policy, drawing on the work of influential monetary economists of the past. JEL Classification: E5, E52