Costly financial crises

This paper presents a model consistent with the business cycle view of the origins of banking panics. As in Allen and Gale [1], bank runs arise endogenously as a consequence of the standard deposit contract in a world with aggregate uncertainty about asset returns. The purpose of the paper is to show that Allen and Gale's result about the optimality of bank runs depends on individuals's preferences. In a more general framework, considered in the present work, a laisse-faire policy can never be optimal, and therefore, regulation is always needed in order to achieve the first best. This result supports the traditional view that bank runs are costly and should be prevented with regulation

Improving the Deductive System DES with Persistence by Using SQL DBMS's

This work presents how persistent predicates have been included in the in-memory deductive system DES by relying on external SQL database management systems. We introduce how persistence is supported from a user-point of view and the possible applications the system opens up, as the deductive expressive power is projected to relational databases. Also, we describe how it is possible to intermix computations of the deductive engine and the external database, explaining its implementation and some optimizations. Finally, a performance analysis is undertaken, comparing the system with current relational database systems.Comment: In Proceedings PROLE 2014, arXiv:1501.0169

Should bank runs be prevented?.

This paper extends Diamond and Dybvig’s model [J. Political Economy 91 (1983) 401] to a framework in which bank assets are risky, there is aggregate uncertainty about the demand for liquidity in the population and some individuals receive a signal about bank asset quality. Others must then try to deduce from observed withdrawals whether an unfavorable signal was received by this group or whether liquidity needs happen to be high. In this environment, both information-induced and pure panic runs will occur. However, banks can prevent them by designing the deposit contract appropriately. It is shown that in some cases it is optimal for the bank to prevent runs but there are situations where the bank run allocation may be welfare superior.Bank runs; Deposit contracts; Liquidation costs; Optimal risk sharing; Suspension of convertibility;

Banks increase welfare.

This paper examines the relative degrees of risk sharing provided by demand deposit contracts and equity contracts. It is shown that in a framework in which individuals have smooth preferences and there exists some type of aggregate uncertainty (interest rate risk), the allocations obtained with a financial intermediary allow in general for greater risk sharing than those achieved in an equity economy. However, the interest rate is essential in order to determine the superiority of demand deposit contracts over equity contracts. The results of the paper contradict the ones obtained by Jacklin [1987] and Hellwig [1994], where demand deposit and equity contracts are always equivalent risk sharing instruments.

A discussion on the origin of quantum probabilities

We study the origin of quantum probabilities as arising from non-boolean propositional-operational structures. We apply the method developed by Cox to non distributive lattices and develop an alternative formulation of non-Kolmogorvian probability measures for quantum mechanics. By generalizing the method presented in previous works, we outline a general framework for the deduction of probabilities in general propositional structures represented by lattices (including the non-distributive case).Comment: Improved versio