GIMPs from Extra Dimensions

We study a scalar field theory in a flat five-dimensional setup, where a scalar field lives in a bulk with a Dirichlet boundary condition, and give an implementation of this setup to the Froggatt- Nielsen (FN) mechanism. It is shown that all couplings of physical field of the scalar with the all brane localized standard model particles are vanishing while realizing the usual FN mechanism. This setup gives the scalar a role as an only Gravitationally Interacting Massive Particle (GIMP), which is a candidate for dark matter.Comment: 9 pages, 1 figure, version to appear in PL

Interbank market integration under asymmetric information

We argue that the main barrier to an integrated international interbank market is the existence of asymmetric information between different countries, which may prevail in spite of monetary integration or successful currency pegging. In order to address this issue, we study the scope for international interbank market integration with unsecured lending when cross-country information is noisy. We find not only that an equilibrium with integrated markets need not always exist, but also that when it does, the integrated equilibrium may coexist with one of interbank market segmentation. Therefore, market deregulation, per se, does not guarantee the emergence of an integrated interbank market. The effect of a repo market which, a priori, was supposed to improve efficiency happens to be more complex: it reduces interest rate spreads and improves upon the segmentation equilibrium, but\ it may destroy the unsecured integrated equilibrium, since the repo market will attract the best borrowers. The introduction of other transnational institutional arrangements, such as multinational banking, correspondent banking and the existence of "too-big-to-fail" banks may reduce cross country interest spreads and provide more insurance against country wide liquidity shocks. Still, multinational banking, as the introduction of repos, may threaten the integrated interbank market equilibrium.Banking theory, asymmetric information, financial integration, interbank markets, diamond-dybvig

Money and payments: a modern perspective

The role of money in society has been a controversial topic in economic theory over many years. Particular attention has been devoted to the analysis whether there should be competition in the supply of money, or whether this is best left to a governmental agency. This paper reviews the theoretical literature on these issues. It also gives an overview over some episodes of free banking where banks could issue currency themselves. Finally, we highlight several aspects in which today we have competition between issuers of money, namely in the international context, with electronic money, and in large value payments systems. JEL Classification: E40, E41, N10electronic money, free banking, Money, payment systems, private money

Quark and Leptonic Mixing Patterns from the Breakdown of a Common Discrete Flavor Symmetry

Assuming the Majorana nature of neutrinos, we recently performed a scan of leptonic mixing patterns derived from finite discrete groups of order less than 1536. Here we show that the 3 groups identified there as giving predictions close to experiment, also contain another class of abelian subgroups that predict an interesting leading order quark mixing pattern where only the Cabibbo angle is generated at leading order. We further broaden our study by assuming that neutrinos are Dirac particles and find 4 groups of order up to 200 that can predict acceptable quark and leptonic mixing angles. Since large flavor groups allow for a multitude of leading order mixing patterns, we define a measure that is suitable to compare the predictivity of a given flavor group taking this fact into account. We give the result of this measure for a wide range of discrete flavor groups and identify the group (Z_18 \times Z_6) \rtimes S_3 as being most predictive in the sense of this measure. We further discuss alternative measures and their implications.Comment: 11 pages, 4 figure

The minimum liquidity deficit and the maturity structure of central banks' open market operations: lessons from the financial crisis

This paper studies the relationship between the size of the banking sector’s refinancing needs vis-à-vis the central bank and auction rates in its open market operations in times of financial market stress. In a theoretical model, it is found that marginal rates at central bank auctions may increase if the share of troubled banks becomes too high relative to the total size of the banking sector’s refinancing needs. An empirical analysis then aims at determining the size of open market operations needed to absorb large stress levels in interbank money markets and hence contain central bank auction rates. Finally, the paper analyses effects of the composition of open market operations of different maturities on auction rates. It is found that a too high share of longer-term refinancing induces a rise in auction rates which is undesirable. Therefore, the analysis suggests that there is a lower bound for the amount of liquidity provided through short-term operations. JEL Classification: G01, G10, G21Central Bank, financial crisis, money market, Open market operations

Lepton Mixing Patterns from a Scan of Finite Discrete Groups

The recent discovery of a non-zero value of the mixing angle theta_13 has ruled out tri-bimaximal mixing as the correct lepton mixing pattern generated by some discrete flavor symmetry (barring large next-to-leading order corrections in concrete models). In this work we assume that neutrinos are Majorana particles and perform a general scan of all finite discrete groups with order less than 1536 to obtain their predictions for lepton mixing angles. To our surprise, the scan of over one million groups only yields 3 interesting groups that give lepton mixing patterns which lie within 3-sigma of the current best global fit values. A systematic way to categorize such groups and the implications for flavor symmetry are discussed.Comment: 15 pages, 3 figures, references added and minor improvements, matches version to be appeared in Physics Letters

Incorporating a "public good factor" into the pricing of large-value payment systems

We study optimal pricing rules for a public large-value payment system (LVPS) that produces a public good (like prevention of systemic risk) but faces competition by a private LVPS for the private provision of large value payments. We show that the marginal cost of the public LVPS has to be corrected by a "public good factor"that can be interpreted alternatively as the decrease in the cost of providing the public good when the private activity of the public system increases, or as the subsidy needed for private banks to internalize the cost of systemic risk. In either interpretation, the public good factor is easy to measure: it corresponds to the subsidy needed for private banks to allocate their payments in the way that is desired by banking authorities. JEL Classification: G28, H41large-value payment systems, pricing rules, public goods

Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk

We study the functioning and possible breakdown of the interbank market due to asymmetric information about counterparty risk. We allow for privately observed shocks to the distribution of asset risk across banks after the initial portfolio of liquid and illiquid investments is chosen. Our model generates sev- eral interbank market regimes: 1) low interest rate spread and full participation; 2) elevated spread and adverse selection; and 3) liquidity hoarding leading to a market breakdown. The regimes are in line with observed developments in the interbank market before and during the 2007-09 financial crisis. We use the model to examine various policy responses.Financial crisis;Interbank market;Liquidity;Asymmetric in- formation