Electing a parliament

We present a model where a society elects a parliament by voting for candidates belonging to two parties. The electoral rule determines the seats distribution between the two parties. We analyze two electoral rules, multidistrict majority and single-district proportional. In this framework, the policy outcome is simply a function of the number of seats parties take in the election. We prove that in both systems there is a unique pure strategy perfect equilibrium outcome. Finally, we compare the outcomes in the two systems

Electing a parliament

We present a model where a society elects a parliament by voting for candidates belonging to two parties. The electoral rule determines the seats distribution between the two parties. We analyze two electoral rules, multidistrict majority and single-district proportional. In this framework, the policy outcome is simply a function of the number of seats parties take in the election. We prove that in both systems there is a unique pure strategy perfect equilibrium outcome. Finally, we compare the outcomes in the two systems.

The effect of ideology on policy outcomes in proportional representation systems

In this paper we propose a model in which there are ideological and strate- gic voters who vote under poportional rule. We prove that the behavior of ideological voters matters for the determination of the outcome. We show that a subset of strategic voters partially counteracts the votes of the ideological voters.Proportional Election, Strategic Voting, Ideological Voting

Moderating Government

We consider a model where policy motivated citizens vote in two simultaneous elections, one for the President who is elected by majority rule, in a single national district, and one for the Congressmen, each of whom is elected by majority rule in a local district. The policy to be implemented depends not only on who is elected President but also on the composition of the Congress. We characterize the equilibria of the model using a conditional sincerity concept that takes into account the possibility that some voters may be simultaneously decisive in both elections. Such a concept emerges naturally in a model with trembles. A crucial feature of the solution is the moderation of Government.voting, proportional rule, majority, parliament.

On the coexistence of money and credit.

This thesis explores the idea of money and credit as complementary media of exchange. Complementarity has interesting implications for the effects of monetary policy on macro-economic variables. The impact of inflation is markedly different in a world in which money and credit are complementary or substitute, i.e. cooperate or compete. In the first chapter, I review some recent literature on the coexistence of money and credit in matching models of money a la Kiyotaki and Wright and in models with spatial separation a la Townsend. I argue that the literature, virtually without exceptions, has seen money and credit as competing media of exchange and concentrated on the role of record keeping technologies in supporting credit as a medium of exchange. Moreover, money doesn't normally serve to clear debts. In chapter 2, I construct an economy with microfoundations for the use of money and bilateral credit as media of exchange. The model features spatial separation, absence of double coincidence of wants and competitive markets. Money is the means of payment: in equilibrium, bilateral credit is paid back with money. Money and credit are complementary. Complementarity generates a reverse Mundell-Tobin effect. The nominal interest rate is more than unit elastic in the inflation rate and therefore the real interest rate increases with inflation. The credit to money and credit to output ratios, output and welfare all decrease with inflation. A model in which the two media of exchange are complementary generates opposite predictions for the effect of inflation on credit with respect to a model where the two media of exchange are substitute. In chapter 3, I consider a modification of the model presented in the previous chapter to show that the elasticity of the interest rate could be less than one without affecting other results. To distinguish between the two cases, I use macroeconomic data for 59 countries over the period 1993-2003 and I estimate the elasticity of the nominal interest rate with respect to the inflation rate using weighted least square with GDP as a weight. I find an elasticity significantly greater than one. I also test the prediction on the effect of inflation on credit/GDP. Chapter 4 discusses three potentially interesting applications of the model. First a model in which agents in equilibrium endogenously decide to become debtors or creditors. Second the issue of seigniorage and finally the question of circulation of promises. In chapter 5, I consider the question of coexistence and social benefits of having a zero rate of return asset -fiat money- and an illiquid nominal, risk-free, interest bearing bond. I consider the model by Kocherlakota (2003) where illiquid bonds coexist with money because they serve to insure against liquidity shocks. I introduce a commitment technology giving agents the ability to issue promises fully backed by bonds. I show that illiquidity is not sufficient to guarantee a role for bonds. For illiquid bonds to be essential some legal restrictions on the issue of promises backed by bonds should be introduced. Finally I present a model in which changes in the liquidity of assets generate interesting predictions about the riskiness of projects undertaken in the economy, output and welfare. In the last chapter, coauthored with Raoul Minetti, we develop a theory of the interaction between the entry of lenders and the real sector. (Abstract shortened by UMI.)

Money and Collateral

This paper presents a model in which collateralized monetary loans are essential as trading instruments. Money and private debt collateralized by real assets complement each other as allocative tools, in an environment with informational and commitment limitations. Illiquid public debt may play a socially beneficial role, when collateral is scarce

Foreign Lenders and the Real Sector

We develop a theory of the interaction between the entry of lenders and the real sector. The high liquidation skills of incumbent lenders render them too tough in terminating high-risk/return projects. Being "foreign" to the market, newcomers have lower ability to liquidate than incumbents. This makes them softer in liquidating high-risk/return projects but renders their funding more costly. We show that the entry of lenders and the share of high-risk/return projects can reinforce each other through firms' liquidation values. This interaction dampens the output impact of liquidity shocks. Hence, financial liberalization can enhance stability. Copyright 2007 The Ohio State University.

Collateral fluctuations in a monetary economy

This paper studies economy-wide fluctuations that occur endogenously in the presence of monetary and real assets. Using a standard monetary search model, we consider an economy in which agents can increase consumption, over and above what their liquid monetary asset holdings would allow, pledging real assets as collateral for monetary loans. It is shown that, if the liquidation value of real assets is below full market value, a stable cyclical equilibrium can emerge in consumption and capital around the unstable steady state. We also provide conditions for the existence of cycles of higher order, chaos and sunspot equilibria.Money search Collateral Cycles