Irasema Alonso - Academia.edu (original) (raw)

Papers by Irasema Alonso

Research paper thumbnail of Equity trading under heterogeneity in ambiguity aversion

We examine the potential importance of heterogeneity in consumers’ ambiguity aversion for asset p... more We examine the potential importance of heterogeneity in consumers’ ambiguity aversion for asset pricing, portfolio allocation, and the wealth distribution. A main focus is to explore a situation in which ambiguity aversion is \above normal", such as when there has been a sudden inow of market-relevant, but hard-to-interpret information: a situation like that during the onset of the recent crisis in nancial markets. During this episode, market participants appeared unsure of the values of a variety of assets, trading all but stopped. Ambiguity aversion, it appears to us, oers a tractable way of analyzing such occurrences theoretically, especially when one allows the possibility that dierent consumers/traders have dierent amounts of ambiguity aversion. By considering a model with heterogeneity on ambiguity, we explain dierences in portfolio allocation, which lead to non-participation|a drastic form of trading less|in the ambiguity-ridden market by certain agents (here we have in mind those with higher levels of ambiguity). This endogenous limited participation on the market also has implications for the relative wealth of agents in an economy. The dynamics of the wealth distribution coming out of the model is one (of several) implications we explore. We show that the equilibrium \belief" of the ambiguity-averse consumer will evolve endogenously and nontrivially over time as a result of the equilibrium interaction. Moreover, we show that the \standard agents" will dominate in the pricing of the assets in the long run (but much less so in the short run).

Research paper thumbnail of Conocimientos, Actitudes y Prácticas de las Trabajadoras del Sexo Acerca del Virus de Papiloma Humano. Centro de Salud de Santa Ana, Distrito de Panamá. Año 2011

Introduction. Prevalence of Human Papillomavirus in Panama is 55% in women over 15 years of age, ... more Introduction. Prevalence of Human Papillomavirus in Panama is 55% in women over 15 years of age, according to a study from Gorgas Conmemorative Institute. Commercial sex workers have a higher risk of contracting Human Papillomavirus because of their profession. Objectives. To determine knowledge, attitude and practices on female sex workers towards Human Papillomavirus treated at the primary care center in Santa Ana. Methods. Descriptive, cross-sectional study. The universe was comprised of 200 women and the sample of 132 with a confidence level of 95%; this was chosen through convenience sampling. The data collection instrument used was a questionnaire-type survey, using the interview technique. Results. 65% of female sex workers are in an age range of 18-29 years old. 93.20% of sex workers who attend to the primary care center of Santa Ana have deficiency knowledge about Human Papillomavirus. We observed that the percentage of female sex workers who have an acceptable attitude was...

Research paper thumbnail of Entrepreneurial wealth accumulation in equilibrium: collateral constraints

This paper explores equilibrium theory of wealth accumulation and wealth inequality when entrepre... more This paper explores equilibrium theory of wealth accumulation and wealth inequality when entrepreneurs have collateral constraints and are subject to idiosyncratic productivity shocks. The model is an extension of Kiyotaki-Moore's setting to incorporate shocks and, at the same time, is a version of the precautionary-savings models due to Bewley, Aiyagari, and others (since entrepreneurs are risk-averse). The model is used to address questions about the determinants of inequality and aggregate productivity, both with an without exogenous technical change, and about aggregate savings policy influences these variables

Research paper thumbnail of Patterns of Exchange, Fiat Money, and the Welfare Costs of Inflation

Research paper thumbnail of Entrepreneurial wealth accumulation in equilibrium: collateral constraints

This paper explores equilibrium theory of wealth accumulation and wealth inequality when entrepre... more This paper explores equilibrium theory of wealth accumulation and wealth inequality when entrepreneurs have collateral constraints and are subject to idiosyncratic productivity shocks. The model is an extension of Kiyotaki-Moore's setting to incorporate shocks and, at the same time, is a version of the precautionary-savings models due to Bewley, Aiyagari, and others (since entrepreneurs are risk-averse). The model is used to address questions about the determinants of inequality and aggregate productivity, both with an without exogenous technical change, and about aggregate savings policy influences these variables

Research paper thumbnail of Ambiguity Aversion and the Welfare Costs of Business Cycles

fluctuations, since consumers can benefit from investing more when productivity is high. The welf... more fluctuations, since consumers can benefit from investing more when productivity is high. The welfare consequences, in each economy, can be large. We also discuss how the results are affected if different consumers have different degrees of ambiguity aversion.

Research paper thumbnail of Ambiguity Aversion, Asset Prices, and the Welfare Costs of Aggregate Fluctuations

SSRN Electronic Journal, 2008

Under the hypothesis that aggregate U.S. consumption is random and, more importantly, viewed as a... more Under the hypothesis that aggregate U.S. consumption is random and, more importantly, viewed as ambiguous by consumers, we examine the implications for asset prices and for how consumption fluctuations influence consumer welfare. We consider a simple, Mehra-Prescott-style endowment economy with a representative agent facing consumption fluctuations calibrated to match U.S. data from 1889 to 2008. Our experiment is to restrict preference parameters in order to as well as possible match some asset-price facts-the average returns on equity and a short-term risk-free bond-and then compute the welfare benefits of removing all consumption fluctuations given those parameters. These benefits turn out to be quite large: consumers are willing to pay about 10% of consumption in permanent terms under our benchmark calibration.

Research paper thumbnail of Persistent, nonfundamental exchange rate fluctuations

Review of Economic Dynamics, 2004

A trading-post model of money is used to show how exchange rates can be affected by extrinsic unc... more A trading-post model of money is used to show how exchange rates can be affected by extrinsic uncertainty. With no uncertainty in fundamentals, we demonstrate that there exist equilibria where exchange rates as well as consumption allocations follow a stationary random process. The fluctuations are permanent, and they affect economic welfare. These findings also apply when the currency supplies grow at different rates. Then, the only stationary equilibria in which both monies are valued are those with fluctuations: the real value of the currencies follow a stationary process, and the average return on the fast-growing currency is lower than that of the slow-growing currency.

Research paper thumbnail of Ambiguity in a Two-Country World

The correlation between consumption levels in different countries is much lower than what is sugg... more The correlation between consumption levels in different countries is much lower than what is suggested by models of efficient risk sharing with c ommon beliefs. Re- latedly, observed asset portfolios of consumers in different countries suggest a "bias" toward home-country securities, even for countries where financial markets are quite well developed. This paper examines a mechanism that can generate these observations by considering preferences that allow ambiguity aversion of the sort illustrated by the Ellsberg Paradox. A key assumption is that the home consumer is more ambiguous about the process generating productivity shocks in the foreign country than about that in the home country. This permits formalization of a statement like "I don't hold foreign stocks because I don't know much about them". The specific context here is that of a two-country dynamic general equilibrium model with real business cycles. It is shown that the model generates low ...

Research paper thumbnail of On avoiding bank runs

Journal of Monetary Economics, 1996

Can bank runs be avoided and should they be avoided? I analyze a banking environment where bank r... more Can bank runs be avoided and should they be avoided? I analyze a banking environment where bank runs can occur as a result of negative signals about the bank's investments. In this environment, banks can make sure that runs do not occur by designing the deposit contract appropriately. I show that there are conditions under which it is profit-maximizing for the bank to avoid runs, and others under which occasional runs are part of optimal bank behavior. I also compare the banking arrangement to an arrangement based on trading in equity.

Research paper thumbnail of Truthful revelation in the Diamond and Dybvig banking environment

Economics Letters, 1993

The welfare analysis in the Diamond and Dybvig banking literature has been conducted by appealing... more The welfare analysis in the Diamond and Dybvig banking literature has been conducted by appealing to the 'revelation principle': the best banking arrangement that induces truthtelling by depositors is characterized, and it is asserted, presumably by appeal to the revelation principle, that no other arrangement could give higher welfare. This appeal to the revelation principle is, however, not straightforward because the Diamond and Dybvig environment includes a sequential service constraint which is not present in standard formulations of the revelation principle. This paper justifies the use of the revelation principle in sequential service environments. * The author acknowledges Ed Green, Per Krusell, and Neil Wallace for valuable comments and encouragement.

Research paper thumbnail of Ambiguity Aversion, the Equity Premium and the Welfare Costs of Business Cycles

Seminar Papers, 2007

We examine the potential importance of consumer ambiguity aversion for asset prices and how consu... more We examine the potential importance of consumer ambiguity aversion for asset prices and how consumption ‡fluctuations influence consumer welfare. First, considering a simple Mehra-Prescott-style endowment economy with a representative agent facing ...

Research paper thumbnail of Endogenous Aggregate Beliefs: Equity Trading under Heterogeneity in Ambiguity Aversion

We examine the potential importance of heterogeneity in consumers' ambiguity aversion for as... more We examine the potential importance of heterogeneity in consumers' ambiguity aversion for asset pricing, portfolio allocation, and the wealth distribution. Ambiguity aversion, which is a way of formalizing preferences that are consistent with the Ellsberg paradox, features first-order ...

Research paper thumbnail of Ambiguity and the Welfare Costs of Aggregate Fluctuations

2005 Meeting Papers, 2005

... Ambiguity and the Welfare Costs of Aggregate Fluctuations. Jose Mauricio Prado () and Irasema... more ... Ambiguity and the Welfare Costs of Aggregate Fluctuations. Jose Mauricio Prado () and Irasema Alonso () Additional contact information Irasema Alonso: Economics University of Rochester. No 463, 2005 Meeting Papers from Society for Economic Dynamics. ...

Research paper thumbnail of The Dynamics of Portfolio Choice and Wealth Inequality when Consumers Differ in Ambiguity Aversion

We examine the potential importance of heterogeneity in consumersn ambiguity aversion for asset p... more We examine the potential importance of heterogeneity in consumersn ambiguity aversion for asset pricing, portfolio allocation, and the wealth distribution. Ambiguity aversion, which is a way of formalizing preferences that are consistent with the Ellsberg paradox, features ...

Research paper thumbnail of Betting against your neighbor: a quantitative investigation

2004 Meeting Papers, 2004

We investigate a two-country model of real business cycles along the lines of Backus, Kehoe, and ... more We investigate a two-country model of real business cycles along the lines of Backus, Kehoe, and Kydland (1992) with one new feature: country one residents are ambiguous [along the lines of Epstein (2001)] about the productivity shocks of country two and vice versa. The model is calibrated and solved numerically. In equilibrium, because domestic residents are ambiguity-averse, they bet against productivity abroad being high, thus lowering their holding of foreign equity relative to the benchmark, no-ambiguity model. Thus, consumption correlations across countries fall significantly. Moreover, foreign real investment behaves differently than in the benchmark mod

Research paper thumbnail of Equity trading under heterogeneity in ambiguity aversion

We examine the potential importance of heterogeneity in consumers’ ambiguity aversion for asset p... more We examine the potential importance of heterogeneity in consumers’ ambiguity aversion for asset pricing, portfolio allocation, and the wealth distribution. A main focus is to explore a situation in which ambiguity aversion is \above normal", such as when there has been a sudden inow of market-relevant, but hard-to-interpret information: a situation like that during the onset of the recent crisis in nancial markets. During this episode, market participants appeared unsure of the values of a variety of assets, trading all but stopped. Ambiguity aversion, it appears to us, oers a tractable way of analyzing such occurrences theoretically, especially when one allows the possibility that dierent consumers/traders have dierent amounts of ambiguity aversion. By considering a model with heterogeneity on ambiguity, we explain dierences in portfolio allocation, which lead to non-participation|a drastic form of trading less|in the ambiguity-ridden market by certain agents (here we have in mind those with higher levels of ambiguity). This endogenous limited participation on the market also has implications for the relative wealth of agents in an economy. The dynamics of the wealth distribution coming out of the model is one (of several) implications we explore. We show that the equilibrium \belief" of the ambiguity-averse consumer will evolve endogenously and nontrivially over time as a result of the equilibrium interaction. Moreover, we show that the \standard agents" will dominate in the pricing of the assets in the long run (but much less so in the short run).

Research paper thumbnail of Conocimientos, Actitudes y Prácticas de las Trabajadoras del Sexo Acerca del Virus de Papiloma Humano. Centro de Salud de Santa Ana, Distrito de Panamá. Año 2011

Introduction. Prevalence of Human Papillomavirus in Panama is 55% in women over 15 years of age, ... more Introduction. Prevalence of Human Papillomavirus in Panama is 55% in women over 15 years of age, according to a study from Gorgas Conmemorative Institute. Commercial sex workers have a higher risk of contracting Human Papillomavirus because of their profession. Objectives. To determine knowledge, attitude and practices on female sex workers towards Human Papillomavirus treated at the primary care center in Santa Ana. Methods. Descriptive, cross-sectional study. The universe was comprised of 200 women and the sample of 132 with a confidence level of 95%; this was chosen through convenience sampling. The data collection instrument used was a questionnaire-type survey, using the interview technique. Results. 65% of female sex workers are in an age range of 18-29 years old. 93.20% of sex workers who attend to the primary care center of Santa Ana have deficiency knowledge about Human Papillomavirus. We observed that the percentage of female sex workers who have an acceptable attitude was...

Research paper thumbnail of Entrepreneurial wealth accumulation in equilibrium: collateral constraints

This paper explores equilibrium theory of wealth accumulation and wealth inequality when entrepre... more This paper explores equilibrium theory of wealth accumulation and wealth inequality when entrepreneurs have collateral constraints and are subject to idiosyncratic productivity shocks. The model is an extension of Kiyotaki-Moore's setting to incorporate shocks and, at the same time, is a version of the precautionary-savings models due to Bewley, Aiyagari, and others (since entrepreneurs are risk-averse). The model is used to address questions about the determinants of inequality and aggregate productivity, both with an without exogenous technical change, and about aggregate savings policy influences these variables

Research paper thumbnail of Patterns of Exchange, Fiat Money, and the Welfare Costs of Inflation

Research paper thumbnail of Entrepreneurial wealth accumulation in equilibrium: collateral constraints

This paper explores equilibrium theory of wealth accumulation and wealth inequality when entrepre... more This paper explores equilibrium theory of wealth accumulation and wealth inequality when entrepreneurs have collateral constraints and are subject to idiosyncratic productivity shocks. The model is an extension of Kiyotaki-Moore's setting to incorporate shocks and, at the same time, is a version of the precautionary-savings models due to Bewley, Aiyagari, and others (since entrepreneurs are risk-averse). The model is used to address questions about the determinants of inequality and aggregate productivity, both with an without exogenous technical change, and about aggregate savings policy influences these variables

Research paper thumbnail of Ambiguity Aversion and the Welfare Costs of Business Cycles

fluctuations, since consumers can benefit from investing more when productivity is high. The welf... more fluctuations, since consumers can benefit from investing more when productivity is high. The welfare consequences, in each economy, can be large. We also discuss how the results are affected if different consumers have different degrees of ambiguity aversion.

Research paper thumbnail of Ambiguity Aversion, Asset Prices, and the Welfare Costs of Aggregate Fluctuations

SSRN Electronic Journal, 2008

Under the hypothesis that aggregate U.S. consumption is random and, more importantly, viewed as a... more Under the hypothesis that aggregate U.S. consumption is random and, more importantly, viewed as ambiguous by consumers, we examine the implications for asset prices and for how consumption fluctuations influence consumer welfare. We consider a simple, Mehra-Prescott-style endowment economy with a representative agent facing consumption fluctuations calibrated to match U.S. data from 1889 to 2008. Our experiment is to restrict preference parameters in order to as well as possible match some asset-price facts-the average returns on equity and a short-term risk-free bond-and then compute the welfare benefits of removing all consumption fluctuations given those parameters. These benefits turn out to be quite large: consumers are willing to pay about 10% of consumption in permanent terms under our benchmark calibration.

Research paper thumbnail of Persistent, nonfundamental exchange rate fluctuations

Review of Economic Dynamics, 2004

A trading-post model of money is used to show how exchange rates can be affected by extrinsic unc... more A trading-post model of money is used to show how exchange rates can be affected by extrinsic uncertainty. With no uncertainty in fundamentals, we demonstrate that there exist equilibria where exchange rates as well as consumption allocations follow a stationary random process. The fluctuations are permanent, and they affect economic welfare. These findings also apply when the currency supplies grow at different rates. Then, the only stationary equilibria in which both monies are valued are those with fluctuations: the real value of the currencies follow a stationary process, and the average return on the fast-growing currency is lower than that of the slow-growing currency.

Research paper thumbnail of Ambiguity in a Two-Country World

The correlation between consumption levels in different countries is much lower than what is sugg... more The correlation between consumption levels in different countries is much lower than what is suggested by models of efficient risk sharing with c ommon beliefs. Re- latedly, observed asset portfolios of consumers in different countries suggest a "bias" toward home-country securities, even for countries where financial markets are quite well developed. This paper examines a mechanism that can generate these observations by considering preferences that allow ambiguity aversion of the sort illustrated by the Ellsberg Paradox. A key assumption is that the home consumer is more ambiguous about the process generating productivity shocks in the foreign country than about that in the home country. This permits formalization of a statement like "I don't hold foreign stocks because I don't know much about them". The specific context here is that of a two-country dynamic general equilibrium model with real business cycles. It is shown that the model generates low ...

Research paper thumbnail of On avoiding bank runs

Journal of Monetary Economics, 1996

Can bank runs be avoided and should they be avoided? I analyze a banking environment where bank r... more Can bank runs be avoided and should they be avoided? I analyze a banking environment where bank runs can occur as a result of negative signals about the bank's investments. In this environment, banks can make sure that runs do not occur by designing the deposit contract appropriately. I show that there are conditions under which it is profit-maximizing for the bank to avoid runs, and others under which occasional runs are part of optimal bank behavior. I also compare the banking arrangement to an arrangement based on trading in equity.

Research paper thumbnail of Truthful revelation in the Diamond and Dybvig banking environment

Economics Letters, 1993

The welfare analysis in the Diamond and Dybvig banking literature has been conducted by appealing... more The welfare analysis in the Diamond and Dybvig banking literature has been conducted by appealing to the 'revelation principle': the best banking arrangement that induces truthtelling by depositors is characterized, and it is asserted, presumably by appeal to the revelation principle, that no other arrangement could give higher welfare. This appeal to the revelation principle is, however, not straightforward because the Diamond and Dybvig environment includes a sequential service constraint which is not present in standard formulations of the revelation principle. This paper justifies the use of the revelation principle in sequential service environments. * The author acknowledges Ed Green, Per Krusell, and Neil Wallace for valuable comments and encouragement.

Research paper thumbnail of Ambiguity Aversion, the Equity Premium and the Welfare Costs of Business Cycles

Seminar Papers, 2007

We examine the potential importance of consumer ambiguity aversion for asset prices and how consu... more We examine the potential importance of consumer ambiguity aversion for asset prices and how consumption ‡fluctuations influence consumer welfare. First, considering a simple Mehra-Prescott-style endowment economy with a representative agent facing ...

Research paper thumbnail of Endogenous Aggregate Beliefs: Equity Trading under Heterogeneity in Ambiguity Aversion

We examine the potential importance of heterogeneity in consumers' ambiguity aversion for as... more We examine the potential importance of heterogeneity in consumers' ambiguity aversion for asset pricing, portfolio allocation, and the wealth distribution. Ambiguity aversion, which is a way of formalizing preferences that are consistent with the Ellsberg paradox, features first-order ...

Research paper thumbnail of Ambiguity and the Welfare Costs of Aggregate Fluctuations

2005 Meeting Papers, 2005

... Ambiguity and the Welfare Costs of Aggregate Fluctuations. Jose Mauricio Prado () and Irasema... more ... Ambiguity and the Welfare Costs of Aggregate Fluctuations. Jose Mauricio Prado () and Irasema Alonso () Additional contact information Irasema Alonso: Economics University of Rochester. No 463, 2005 Meeting Papers from Society for Economic Dynamics. ...

Research paper thumbnail of The Dynamics of Portfolio Choice and Wealth Inequality when Consumers Differ in Ambiguity Aversion

We examine the potential importance of heterogeneity in consumersn ambiguity aversion for asset p... more We examine the potential importance of heterogeneity in consumersn ambiguity aversion for asset pricing, portfolio allocation, and the wealth distribution. Ambiguity aversion, which is a way of formalizing preferences that are consistent with the Ellsberg paradox, features ...

Research paper thumbnail of Betting against your neighbor: a quantitative investigation

2004 Meeting Papers, 2004

We investigate a two-country model of real business cycles along the lines of Backus, Kehoe, and ... more We investigate a two-country model of real business cycles along the lines of Backus, Kehoe, and Kydland (1992) with one new feature: country one residents are ambiguous [along the lines of Epstein (2001)] about the productivity shocks of country two and vice versa. The model is calibrated and solved numerically. In equilibrium, because domestic residents are ambiguity-averse, they bet against productivity abroad being high, thus lowering their holding of foreign equity relative to the benchmark, no-ambiguity model. Thus, consumption correlations across countries fall significantly. Moreover, foreign real investment behaves differently than in the benchmark mod