We ask whether a model of the US and Europe trading with the rest of the world can match the facts of world behaviour in a powerful indirect inference test. One version has uncovered interest parity (UIP), the other risk-pooling. Both pass the test but the most probable is risk-pooling. This is...

Strong evidence now exists both in macro and micro data that price/wage durations are depent on the state of the economy and especially inflation. We embed this dependence in a macro model of the US that otherwise does well in matching the economy s behaviour in the last three decades; it now...

The paper takes the stand that the central banks as financial regulators have their own interest in imposing more regulations. It models the institutional behaviour for the central bank and government using the Indirect Inference testing and estimation method as it finds a set of coefficients of...

Indirect inference testing can be carried out with a variety of auxiliary models. Asymptotically these different models make no difference. However, the small sample properties can differ. We explore small sample power and estimation bias both with different variable combinations and descriptive...

The UK has been a net debtor over the past two decades and the sterling exchange rates are sensitive to any chaos that might occur in the Financial market. This paper examines the importance of the inter-national financial imperfections in the sterling exchange rate dynamics. We build a small...

We review recent findings in the application of Indirect Inference to DSGE models. We show that researchers should tailor the power of their test to the model under investigation in order to achieve a balance between high power and model tractability; this will involve choosing only a limited...