During the recent debt crisis in Europe, policy makers responded to the controversy surrounding CDS by implementing a series of policies that banned CDS trading. Sambalaibat (2014) documents that a temporary CDS ban increased bond market liquidity but a permanent ban instead decreased bond market liquidity. To explain these patterns, I build a search-theoretic model of OTC bond and CDS markets ...

The asymmetric volatility, temporary volatility, and permanent volatility of financial asset returns have attracted much interest in recent years. However, a consensus has not yet been reached on the causes of them for both the stocks and markets. This paper researched asymmetric volatility and short-run and long-run volatility through global financial crisis for eight Asian markets. EGARCH and...

We consider a two-period durable goods monopoly model with demand uncertainty. When uncertainty is non-multiplicative, there can be equilibria in which, whenever the period 0 price exceeds a threshold, then with positive probability all consumers boycott in period 0. A consumer who in period 0 would purchase in the non-boycott equilibrium is willing to join a boycott because a boycott prevents ...

We analyze an exchange economy of unsecured credit where borrowers have the option to declare bankruptcy in which case they are temporarily excluded from financial markets. Endogenous credit limits are imposed that are just tight enough to prevent default. Economies with temporary exclusion differ from their permanent exclusion counterparts in two important properties. If households are extreme...

In a two-period pure exchange economy with financial assets, a temporary financial equilibrium is an equilibrium of the current spot and security markets given forecasts of future prices and returns. The temporary equilibrium model can then be interpreted as a Walrasian model where preferences depend on prices. This idenfication implies, among other consequences, the generic determinateness of ...

We consider a multi--sector overlapping generations model with imperfectly competitive firms in the output markets and wage setting trade unions in the labour markets. A coordination problem between firms creates multiple temporary equilibria which are either Walrasian or of the Keynesian unemployment type. There exist many deterministic and stochastic equilibrium cycles fluctuating between Key...

An exogenous increase in the money supply is typically followed by a temporary fall in nominal interest rates. Flexible price macroeconomic models argue that this liquidity effect arises because asset markets are segmented. That is, only a fraction of the agents are present in the bond market when the central bank conducts an open market operation. However, to be quantitatively successful, segm...

Large institutional investors dominate many financial markets. This paper develops a consumption-based model of markets in which all institutional traders recognize their impact on prices. Bilateral (buyer and seller) market power changes efficiency and arbitrage properties of equilibrium. Predictions match temporary and permanent price effects of supply shocks, order breakup, limits to arbitra...