I analyze equilibria in an infinite-horizon model of elections with a twoperiod term limit in the presence of adverse selection and moral hazard. The focus is on responsiveness of policy choices of first-term politicians. In equilibrium, office holders’ policy choices are ordered by type; politicians exert positive effort in the first term of office; and as politicians become highly office moti...

This short paper resolves an apparent contradiction between Feldman’s (1989) and Riedel’s (2000) equilibrium models of the term structure of interest rates under incomplete information. Feldman (1989) showed that in an incomplete information version of Cox, Ingersoll, and Ross (1985), where the stochastic productivity factors are unobservable, equilibrium term structures are “interior” and boun...

In this paper, we aim at exploring how individual location decisions affect the shape of a growing city and, more precisely, how they may add up to a configuration that diverges from equilibrium configurations formulated ex-ante. To do so, we provide a two-sector city model merging a static equilibrium analysis with agent-based simulations. Results show that under strong agglomeration effects, ...

We assess the behavior of real effective exchange rates (REERs) of members of the CEMAC zone with respect to their long-term equilibrium paths. A reduced form of the fundamental equilibrium exchange rate (FEER) model is estimated and associated misalignments are derived for the period 1980 to 2009. Our findings suggest that for majority of countries, macroeconomic fundamentals have the expected...

We develop a theoretical model of firm dynamics and unemployment and characterize equilibria with tenure dependent separation taxes. The model is a version of the Lucas and Prescott island model with undirected search. Two equivalent decentralizations are considered: one with spot labor markets and one with long-term employment relations. We model “temporary contracts" as the special case of a ...

Equilibrium, affine asset pricing models with L. Epstein and S. Zin (1989)’s preferences typically generate time-variation in risk premiums through time variation in the quantity of risks, with the market prices of risks (MPR) held constant. This is true of models with built in longrun consumption risks (LRR) (e.g., R. Bansal and A. Yaron (2004), R. Bansal, D. Kiku and A. Yaron (2009)), as well...

Abstract. In this paper, we formulate a general time-inconsistent stochastic linear–quadratic (LQ) control problem. The time-inconsistency arises from the presence of a quadratic term of the expected state as well as a state-dependent term in the objective functional. We define an equilibrium, instead of optimal, solution within the class of open-loop controls, and derive a sufficient condition...

Farmer (1991) suggests that in a model in which there are multiple rational expectations (RE) equilibria agents may find it useful to coordinate their expectations in a unique RE equilibrium which is immune to the Lucas Critique. In this paper, we evaluate Lucas proof (LP) equilibrium performance in the context of the term structure of interest rates model by using post-war US data. Estimation ...

In this study, asymptotic analysis of an HIV-1 epidemic model with distributed intracellular delays is proposed. One delay term represents the latent period which is the time when the target cells are contacted by the virus particles and the time the contacted cells become actively infected and the second delay term represents the virus production period which is the time when the new virions a...