AbstractWe propose a flexible majority rule for central-bank councils where the size of the majority depends monotonically on the change in interest rate within a particular time frame. Small changes in interest rate require a small share of supporting votes, even less than 50\%. We show that flexible majority rules are superior to simple majority rules and can implement the optimal monetary policy under a variety of circumstances.
A shorter version of the paper can be found in the Journal of Money Credit and Banking
Volume 41, Issue 2-3, pages 507–516, March-April 2009
AbstractIn order to find a closed form solution of the Ramsey growth model usually author's take consumer preferences and production technology as given. Espe- cially with the assumptions of consumer CRRA preferences and Cobb-Douglas production technology Smith (2006) derived the widely adopted solution in case of capital's share equals consumer's risk aversion parameter, which implies con- sumption per capital to be constant. We skip the assumption of a given produc- tion technology and replace this by the assumption that consumption per capital follows a logistic growth process. In this case we derive the general solution, for the evolution of capital and consumption in time. Not surprisingly this includes the solution formerly described. But additionally, at least in a technical way, we obtain a closed form solution with a non linear dependence between consumption and capital.
AbstractIn this paper we provide one single aspect of the financial crisis. We show in a very simple model the dramatic downgrade of a simplified CDO, if the default probability of the underlying credit varies slightly.