Liquidity and Economic Fluctuations

This paper shows that private information may be crucial in explaining the relationship between liquidity, investment and economic fluctuations. First, it defines liquidity in a way that is clearly connected to investment and output. Second, it models economies where privately informed entrepreneurs issue debt to fund their investment opportunities and identifies a theoretically based, empirically usable, and macroeconomic relevant measure of liquidity of the economy: the cross-firm dispersion in debt yields. Finally, it rationalizes one novel stylized fact regarding the US corporate bond market: the positive relationship between the proposed meaure of liquidity - the cross-firm dispersion in the "yields to maturity" on newly issued publicly traded debt - and subsequent aggregate economic activity.Liquidity; private information; robust pooling equilibrium; bond yield

Spherical collapse and halo mass function in the symmetron model

We study the gravitational clustering of spherically symmetric overdensities and the statistics of the resulting dark matter halos in the "symmetron model", in which a new long range force is mediated by a $Z_2$ symmetric scalar field. Depending on the initial radius of the overdensity, we identify two distinct regimes: for small initial radii the symmetron mediated force affects the spherical collapse at all redshifts; for initial radii larger than some critical size this force vanishes before collapse because of the symmetron screening mechanism. In both cases overdensities collapse earlier than in the $\Lambda$CDM and statistically tend to form more massive dark matter halos. Regarding the halo-mass function of these objects, we observe order one departures from standard $\Lambda$CDM predictions. The formalism developed here can be easily applied to other models where fifth-forces participate to the dynamics of the gravitational collapse.Comment: 17 pages, 5 figures. Minor revisions to match published versio

Real Estate Prices and the Importance of Bequest Taxation

In the context of a general equilibrium model with overlapping generations and intergenerational altruism we show that, ceteris paribus, a decrease in taxes on inter vivos donations and bequests brings about an increase in real estate prices. This result has relevant policy implications. We test the predictions of our theory exploiting the abolition of bequest and donation taxation that took place in Italy in 2001. We implement this test by using an original and unique dataset on sales, donations and real estate prices for 13 italian cities between 1993 and 2004. Our estimates suggest that, controlling for other explanatory variables, the 2001 abolition of taxation on bequests and donations contributed substantially to the appreciation of Italian residential real estate.bequest tax; donations; real estate

An offline/online procedure for dual norm calculations of parameterized functionals: empirical quadrature and empirical test spaces

We present an offline/online computational procedure for computing the dual norm of parameterized linear functionals. The key elements of the approach are (i) an empirical test space for the manifold of Riesz elements associated with the parameterized functional, and (ii) an empirical quadrature procedure to efficiently deal with parametrically non-affine terms. We present a number of theoretical results to identify the different sources of error and to motivate the technique. Finally, we show the effectiveness of our approach to reduce both offline and online costs associated with the computation of the time-averaged residual indicator proposed in [Fick, Maday, Patera, Taddei, Journal of Computational Physics, 2018 (accepted)]

International capital flows and credit market imperfections: A tale of two frictions

The financial crisis of 2007-08 has underscored the importance of adverse selection in financial markets. This friction has been mostly neglected by macroeconomic models of financial imperfections, however, which have focused almost exclusively on the effects of limited pledgeability. In this paper, we fill this gap by developing a standard growth model with adverse selection. Our main results are that, by fostering unproductive investment, adverse selection: (i) leads to an increase in the economy’s equilibrium interest rate, and; (ii) it generates a negative wedge between the marginal return to investment and the equilibrium interest rate. Under financial integration, we show how this translates into excessive capital inflows and endogenous cycles. We also extend our model to the more general case in which adverse selection and limited pledgeability coexist. We conclude that both frictions complement one another and show that limited pledgeability exacerbates the effects of adverse selection.Limited Pledgeability, Adverse Selection, International Capital Flows, Credit Market Imperfections

International Capital Flows and Credit Market Imperfections: a Tale of Two Frictions

The financial crisis of 2007-08 has underscored the importance of adverse selection in financial markets. This friction has been mostly neglected by macroeconomic models of financial frictions, however, which have focused almost exclusively on the effects of limited pledgeability. In this paper, we fill this gap by developing a standard growth model with adverse selection. Our main results are that, by fostering unproductive investment, adverse selection: (i) leads to an increase in the economy's equilibrium interest rate, and (ii) it generates a negative wedge between the marginal return to investment and the equilibrium interest rate. Under financial integration, we show how this translates into excessive capital inflows and endogenous cycles. We also explore how these results change when limited pledgeability is added to the model. We conclude that both frictions complement one another and argue that limited pledgeability exacerbates the effects of adverse selection.Limited Pledgeability; Adverse Selection; International Capital Flows; Credit Market Imperfections

Collateral, Financial Arrangements and Pareto Optimality

The existence of collateral requirements to guarantee repayment on issued securities reduces in general the efficiency of competitive equilibria. The general equilibrium analysis is presented in a world where reputation plays no role, and the lender always expects a future payment equal to the future market value of provided collateral. In this context I show that collateral requirements result in two distinct problems for efficiency. I argue that two financial arrangements, tranching and financial pyramiding, arise in developed capital markets in response to the challenges posed by collateral requirements. If these arrangements are sufficiently developed, then the pareto efficiency of competitive equilibria is restored, even in the presence of collateral requirements.Collateral, Pareto Optimality, Financial Arrangements, Tranching, Financial Pyramiding.

Andreev levels spectroscopy of topological three-terminal junctions

We calculate the differential conductance at a probe inserted in the weak link of a topological Josephson junction, consisting of a semiconducting nanowire deposited on top of two separated superconductors. Our aim is to understand how the peculiar features in the spectrum of Andreev bound states, arising due to the presence of Majorana bound states at the ends of the two topological superconducting wires defining the junction, can be determined through a measurement of the differential conductance. We find that when the probe allows a single propagating mode, the differential conductance presents a dip at zero voltage of zero conductance close to the position where the spectrum exhibits the topologically protected crossing. This can be viewed as a signature of the presence of Majorana states, which does not require fermion parity conservation and is robust against parameters' changes, as well as disorder. On the contrary, when the probe allows two or more propagating modes the differential conductance resembles the spectrum of Andreev bound states. This has been established making use of both numerical and analytical methods.Comment: 10 pages, 10 figures, published versio