Portfolio Allocation and International Risk Sharing

Recent contributions have shown that it is possible to account for the so-called consumption-real exchange anomaly in models with goods market frictions where international asset trade is limited to a riskless bond. In this paper, we consider a more realistic international asset market structure and show that as soon as we depart from the single bond economy, we can no longer account for the consumption-real exchange anomaly. Our central result holds for a simple asset market structure in which two nominal bonds are traded across countries. We explore the role of demand shocks such as news shocks in generating meaningful market incompleteness. We show that only under specific settings news shocks can improve the performance of the model in matching the portfolio positions and consumption-real exchange rate correlations that we observe in the data.Portfolio choice, incomplete financial markets, international risk sharing, consumption-real exchange rate anomaly

Inkdots as advice for finite automata

We examine inkdots placed on the input string as a way of providing advice to finite automata, and establish the relations between this model and the previously studied models of advised finite automata. The existence of an infinite hierarchy of classes of languages that can be recognized with the help of increasing numbers of inkdots as advice is shown. The effects of different forms of advice on the succinctness of the advised machines are examined. We also study randomly placed inkdots as advice to probabilistic finite automata, and demonstrate the superiority of this model over its deterministic version. Even very slowly growing amounts of space can become a resource of meaningful use if the underlying advised model is extended with access to secondary memory, while it is famously known that such small amounts of space are not useful for unadvised one-way Turing machines.Comment: 14 page

The interests of refugees should not be forgotten in the attempt to distribute them fairly across the EU

EU member states agreed on 23 September to implement a quota system in which 120,000 refugees will be relocated from Greece and Italy to other countries across the EU. Esin Küçük writes that while there is a need to ensure a fair distribution of responsibility for refugees between member states, the interests of refugees should remain the most important concern. She argues that member states should reconsider the restrictions on secondary movements by asylum seekers within the EU, with individual countries compensated via a central fund for any inequalities that arise